U.S. executives lead the world by a wide margin in expectations for sizable growth, with 69% anticipating “substantial” economic expansion-up from 23% last year, according to the 2017 Global Business and Spending Outlook by American Express and Institutional Investor.
Overview: Ready, Set, Grow
Companies are ready to set aside the “do more with less” mandate that they have applied to administrative and support functions during several years of post-recession retrenchment.
After years of retrenchment, many companies around the world are set this year to pursue renewed opportunities for growth. The 2017 Global Business & Spending Outlook indicates an optimistic global outlook overall, with exceptionally robust expectations in North America and in Asia/Australia offsetting a flat-to-negative outlook in Latin America and Europe. More companies expect to increase spending and investment, but in general company spending and investment are likely to be value conscious and carefully managed to protect the bottom line, in addition to promoting top-line growth. Companies are ready to set aside the “do more with less” mandate that they have applied to administrative and support functions during several years of post-recession retrenchment; they now appear poised to apply more resources to back office functions and support activities, with an eye to gaining efficiencies.
Even as they look forward to more robust growth prospects, senior finance executives are keenly aware that their companies are preparing to compete on an expansive and highly competitive global playing field—one that will require a new level of technological and managerial savvy. This year’s survey explores the views of CFOs and other senior finance executives on an array of business trends, from their approach to political and economic uncertainty, to their thinking on information security, to sources of value and competitive differentiation, and to the role of sophisticated analytics in company decision-making.
The survey also examines the role of the finance function in this complex competitive landscape. Although few would dispute that finance has become higher profile in recent years, survey results show that the CFO’s influence is ascending to a new high. For many companies, “finance leadership” and “enterprise leadership” are now one and the same.
The pace of global growth is accelerating, led by North America and Asia
The 2017 Global Business & Spending Outlook reveals brightening growth prospects in many parts of the world. Overall expectations for “modest” or “substantial” economic expansion among large companies are on the rise: 70% of all survey respondents predict economic expansion in the country where their position is based, compared with 64% last year. Furthermore, the percentage of respondents anticipating “substantial” (as opposed to “modest”) economic expansion leapt upward this year to 10-year highs. (See Figure 1.) Based on the proportion of respondents anticipating substantial expansion—this study’s strongest statement of a bright economic future—economic optimism around the world is at its highest level this year since the inception of this 10-year annual study.
In the immediate aftermath of the 2008 financial crisis, emerging markets in Latin America and in Asia/Australia led the world’s growth expectations; expectations in North America and in Europe generally lagged behind. In last year’s study, however, slowing growth in China and concern over China’s economic transition (i.e., China’s ongoing shift from an economy reliant on exporting manufactured goods to a services-based economy fueled by domestic consumption) led to a dip in expectations in Asia/Australia.
With the exception of Europe, a majority of respondents expect economic expansion in their home countries in 2017.
Country-level results show an exceptionally robust outlook in both the U.S. and Canada, and across most of Asia. In Canada, expectations have been buoyed by a rebound in the country’s energy and mining sectors. The U.S. economy has continued to expand at a steady pace, supported by a robust job market and rising housing prices.
This year, survey results show a dramatic uptick in optimism in North America, where expectations for economic expansion now lead the world by a wide margin. This year’s results also reflect a rebound of sentiment in Asia/Australia, supported by strong growth in China’s manufacturing sector in the second half of the year (fueled, in turn, by a strong property market and government infrastructure spending), as well as positive signals tied to regulatory and financial reforms in Japan.
Country-level results show an exceptionally robust outlook in both the U.S. and Canada and across most of Asia (with the exception of India, where respondents are digesting the potential impact of recent changes in currency policy). In Canada, expectations have been buoyed by a rebound in the country’s energy and mining sectors. Meanwhile, the U.S. economy has continued to expand at a steady pace, supported by a robust jobs market and rising housing prices.
By contrast, expectations for growth in Europe appear to have eroded substantially among large companies since last year, despite the emergence of a range of positive economic signals in the region, including solid business growth and signs of rising prices (easing fears of deflation). The impact of the Brexit vote is weighing particularly heavily in the U.K.: the percentage of respondents in the U.K. anticipating economic expansion in 2017 stands at only 33%—down 42 percentage points from last year. European respondents may also be factoring in uncertainty tied to upcoming elections in Germany, France, and the Netherlands, which have the potential to shift the economic- and fiscal-policy status quo. It is important to note, however, that survey results also indicate that company spending and investment in Europe are poised to increase in 2017—a practical recognition, perhaps, of Europe’s strengthening economic fundamentals.
In Latin America, the outlook is relatively flat year-on-year, as the region continues to feel the effects of falling oil prices, uncertainty tied to international trade agreements, and the aftermath of major political and economic crises in Brazil and Venezuela. The outlook in Argentina is notably more optimistic than in other Latin American countries, buoyed by the recent resolution of the country’s sovereign debt crisis.
Spending and Investment
Purse strings are loosening as companies seek to achieve sustained, profitable growth amid fierce competition
As confidence in economic prospects grows, so too do companies’ ambitions for spending and investment. This year’s 2017 Global Business & Spending Outlook shows that large companies are ready to loosen their purse strings, not just to take full advantage of renewed growth opportunities, but also to improve efficiency by reinvesting in resource-starved back office and support functions. Their ultimate objective? To maintain and extend their competitive edge. Although more large enterprises around the globe expect to expand their business spending and capital investment this year, survey results also show that large companies will remain highly conscious of value, evaluating their spending and investments carefully to ensure maximum returns.
Preparing to compete
Buoyed as they may be by improving economic prospects, executives are also alert to competitive threats. Survey results show that companies are prepared to spend and invest substantial sums to stay competitive in the coming year, even as senior finance executives recognize that the scope of competition is continually expanding to include new and evolving dimensions of value.
Across the population of all respondents, top business goals