US and Bric states lead global rebound

The global economic rebound is becoming entrenched, led by the US and fast-emerging countries such as Brazil, according to a business survey out on Monday that reveals a sharp improvement in corporate confidence worldwide.

The results of the latest business outlook report published by KPMG, the corporate service provider, suggest economic activity will pick up considerably in the next 12 months. But the recovery could be less marked in Europe and Japan, where manufacturers expect to continue shedding jobs over the next 12 months.

The upbeat news comes as the European Central Bank prepares for its interest-rate setting meeting this week, and Ben Bernanke faces hearings on his reappointment as US Federal Reserve chairman.

After the collapse of Lehman Brothers, economies around the world saw a near-synchronised downturn in activity. Although the results were collected before last week’s events in Dubai – which could hit economic confidence elsewhere – the KPMG survey showed that, in October, optimism in manufacturing and service companies was highest in the US and the so-called Bric countries – Brazil, Russia, India and China.

The global survey of 6,200 companies, extended for the first time to cover the US and Japan, gauged trends in activity by deducting the percentage of companies forecasting a decline in the next year from the percentage expecting a rise. For the US, that resulted in positive balances of 65.6 per cent in services and 54 per cent in manufacturing. For the Bric countries, the corresponding figures were 51.9 and 54.1 per cent.

“This represents a quite remarkable turnround in business confidence, well above what we might have hoped for, especially in the US,” said Alan Buckle, global head of advisory at KPMG.

Among the Brics, optimism in Brazil was exceptionally strong. However, the results were more sobering for Japan and the European Union. In the EU, a net balance of 37.7 per cent of service companies and 33.9 per cent of manufacturers expected an increase in business activity in the next 12 months.

Those results pointed to significant improvement compared with even a few months ago. However, the EU picture was made bleaker by its manufacturers’ fears about employment prospects, with significantly more expecting to cut jobs over the next 12 months than were expecting to hire extra workers. In Japan, service as well as manufacturing companies expected to cut jobs.

Official figures for gross domestic product showed that the recessions in Germany and France ended in the second quarter of this year, with the 16-country eurozone as a whole returning to growth in the third quarter. In contrast, the UK economy continued to contract.

However, the KPMG survey showed the UK rebound in manufacturing was faster than in all the other EU countries covered, and nearly as rapid as in the US – almost certainly boosted by sterling’s weakness. The expected pick-up in UK service sector activity was more muted but still stronger than in Germany and the EU average.

According to the KPMG survey, Greece was the only country in which manufacturers expected activity to contract in the next 12 months. That highlighted widespread worries about the Greek economy, where public finances have spun out of control.