Confidence in economy slips among Asian CEOs -- YPO

Posted on August 09, 2017

CONFIDENCE in the Asian economy declined among chief executives in the second quarter, the survey’s sponsor, the Young Presidents’ Organization (YPO), said.

Job applicants queue up as they wait for their turn to be interviewed at a job fair in Manila. -- AFP
The YPO Global Pulse Confidence Index for Asia dropped 1.8 points to 61.5 from 63.3, reversing most of the improvements seen in the first quarter, when the Asian index gained 2.1 points.

The dip in confidence in Asia reflects the overall global trend, with the YPO Global Pulse Confidence Index declining by 0.5 points in the second quarter to 62.

The YPO Global Pulse is a survey of economic confidence of the 24,000 members of YPO from over 130 countries.

The survey garners information from members about sales, headcount and fixed investment; expected changes in sales, headcount and fixed investment 12 months from now; current economic climate affecting their businesses today compared to six months earlier; and expected economic climate six months from now.

The global dip was led by survey participants in the United States, where the sub-index was down 1.6 points; the Middle East and North Africa, down 4.5 points. Regions reflecting increased confidence were non-European Union countries (up 8.5 points); and Australasia (up 3.6 points). The confidence index for Australasia was at 67, the highest in the world.

This overall decline in confidence in Asia was led by a decline of 2.4 points in the China sub-index to 59.2, while India, where the sub-index dipped slightly, remained the most confident of the world’s top 10 economies at 65.4.

The outlook in Japan declined, with its sub-index edging down 1.2 points to 54.5, its lowest level in a year.

The region’s emerging economies also experienced a drop in confidence, reversing some of the improvements in sentiment reported over the previous six months. The sub-index for the Association of Southeast Asian Nations (ASEAN) fell 5.2 points to 60.8, with Singapore, Malaysia and Indonesia reporting a more subdued outlook. Confidence in Singapore plunged 9.5 points.

Broadly, the outlook in Asia has remained relatively unchanged, recording in the low 60s since January 2016, suggesting that the economic climate across the region is stable, and is set to remain so over the coming year, with moderate GDP and employment growth expected.

“While there has been a slight downturn in sentiment across the board in Asia, it should be noted that the overall picture looks relatively positive,” said YPO member Jairaj Purandare, Chairman of JMP Advisors.

“Business leaders in the region, in both established and emerging economies, will still feel optimistic about their prospects for growth over the next year, while remaining watchful of the sociopolitical landscape and the likely direction of the wider global economy,” Mr. Purandare added.

When asked to give their outlook for their own organizations over the next 12 months based on the Index’s three key indicators -- sales, employment, and fixed investment -- business leaders in Asia remained positive. The YPO Sales Confidence Index for Asia climbed 0.6 points to 70.9 in the second quarter, with 72% of chief executives expecting to increase revenue over the coming year, while only 1% predicted a decline.

Asian chief executives were less positive however when it came to their forecasts for employment and fixed investment.

The YPO Employment Confidence Index for the region fell 3.0 points to 55.3, its lowest level in the eight-year history of the YPO Global Pulse survey. Only above a quarter (28%) of respondents were expecting to boost headcount in the next 12 months, and the majority (66%) predicted that staff numbers would remain flat.

The YPO Fixed Investment Confidence Index for Asia fell 3.9 points to 59.3, its lowest level since October 2015. Looking ahead 12 months, 41% of respondents said they expect to increase fixed investment spending, while 52% believed that investment levels would remain unchanged.

The study revealed some encouraging signs about the short-term economic conditions in Asia.

The majority (53%) of chief executives believed that the economic climate would improve over the next six months, compared with only 10% who predicted that the business and economic environment would deteriorate.

YPO members are under the age of 45 and must hold the top position of a qualifying company or division. Altogether, YPO member-run companies employ more than 15 million people and generate $6 trillion in annual revenues. -- Patrizia Paola C. Marcelo