Escalating global inflation is the biggest challenge to businesses struggling to recover from the economic downturn, according to the latest Global Economic Conditions survey of finance professionals by the Association of Chartered Certified Accountants (ACCA). The survey of more than 2,300 accountants in March 2011, the largest ever undertaken by ACCA, shows that for the first time more than half-51 per cent-reported problems with rising operating costs, making this the most commonly cited business challenge. Only 31 per cent had reported rising costs as being a problem when the question was asked in the fourth quarter of 2011. While they reported that there were still businesses opportunities, these increased costs made it more difficult for accountants to spot opportunities for both growth and cost-cutting for the businesses they advise.
"Although the worst problems were reported in Malaysia and Singapore, this trend was not confined to the faster-growing emerging markets but was reported with only marginally lesser intensity in the more sluggish developed economies," the survey stated. Report author Manos Schizas, senior policy adviser with ACCA, said: "The huge rise in inflation has been the most worrying development to emerge in our latest survey. More than half of the respondents reported problems with rising operating costs, which will hinder their ability to look for new opportunities at the time when businesses desperately need to fill the order books. "The number of finance professionals worried about inflation will also be of concern to governments which have a range of measures in place to control rising prices. These measures were designed to ensure that businesses do not fail because they cannot afford the raw materials or expertise," he said.
Fragile environment
Responses suggest that the global economic recovery picked up speed again in early 2011, after briefly going into reverse at the end of 2010, but that conditions remain fragile. Accountants reported that both demand for goods and services and cash flow conditions has continued to improve around the world. While this has generally lead to a more stable outlook for employment and investment in developed countries, accountants in the developing world reported slightly less investment in staff and more layoffs as businesses come to terms with the weaker-than-expected recovery. In the developing world, members saw an opportunity in exports, relying mostly on strong supply chain relationships, investments in quality, and innovation. Accountants in developed markets, however, reported fewer opportunities in all of these areas compared to previous quarters-while still anticipating a rise in new orders for their businesses.
The Americas
The third quarter of 2010 marked a turning point for confidence in the broader region. Since then, and although accountants in the region have similar levels of faith in the strength of the global recovery, confidence has been rising in North America, where 45 per cent of respondents reported gains in the last quarter, and falling in the Caribbean, where only 31 per cent did. This is mostly due to the fact that demand in North America is recovering faster, while in the Caribbean it is still subdued and could deteriorate further. Access to finance is also improving faster in North America, while cash flow pressures are on the rise in the Caribbean.