Global confidence improved significantly in the third quarter of the year among accountants, despite fears of a prolonged economic recession amid the novel coronavirus pandemic, according to a survey of members of the Association of Chartered Certified Accountants and the Institute of Management Accountants.
The ACCA and IMA’s latest "Global Economic Conditions Survey," released Tuesday, indicated a global recovery through the second half of the year after an unprecedented collapse in economic activity during the first half. However, while there are signs of an economic expansion late this year, the poll also showed increasing expectations that significant economic recovery will be pushed into 2021.
Matt Posner is founder and principal of CSG. Mr. Posner has more than a decade of experience in public finance and policy. He has testified before the U.S. Senate Committee on Finance on infrastructure finance problems facing the country and spent years educating staff in the U.S. House of Representatives, the U.S. Senate, the U.S. Treasury Department and the Securities and Exchange Commission on public policy and market implications. Mr. Posner has been quoted on his views and published in the Wall Street Journal, the New York Times, Bloomberg News, The Bond Buyer, the Municipal Finance Journal and the Government Finance Officers Association’s Government Finance Review, among others. Court Street Group LLC is a research and consulting firm based in Brooklyn, New York. At CSG, we build bridges among Washington, Wall Street and the Fintech worlds with strong market research and extensive, independent policy experience. CSG also has ties to Latin America and helps clients navigate there.
Patrick McCoy is the Director of Finance at the Metropolitan Transportation Authority (MTA) in New York where he manages the Authority's debt portfolio (currently $35 billion) and directs the issuance of over $2 billion in tax-exempt municipal bonds annually under the Authority's multi credit borrowing structure. The MTA is an active issuer of debt obligations to finance the bond funded portion of MTA's Capital Program. Pat has previously served as the Executive Director of the New York City Municipal Water Finance Authority, a public benefit corporation of the City of New York that provides capital financing for the City's water and sewer system. Pat was Executive Director of New York Water from January 2007 through August 2008.Previous positions include:Deputy Director of Finance for the MTA, 2002 through 2004, and Director of Finance, 2004 — 2007.Manager of Investor Relations for the NewPower Company, a publicly traded retail energy provider headquartered in Purchase, New York. Mr. McCoy was involved in NewPower's initial public offering and listing on the New York Stock Exchange. 2001 — 2001.Manager of Investor Relations for the New York City Municipal Water Finance Authority, the Transitional Finance Authority (TFA) and TSASC, Inc. (Tobacco Securitization), 1994 — 2000. Pat created the first investor relations program for the Authority.Senior Budget Analyst, Office of Management and Budget, Community Development Unit. 1991 — 1994.Pat currently serves on the Board of Directors of the Westchester County Health Care Corporation and on the Executive Board of the Government Finance Officer'sAssociation of the United States and Canada (GFOA).Pat holds a M.S. Degree in Urban Policy Analysis and Management from the New School University in New York, and a B.A. from St. Ambrose University in Davenport, Iowa.
Activity indicators such as orders, capital spending and employment all rebounded somewhat from the low points seen in the Q2 survey. The global orders balance recovered by nine points in the third quarter, signalling a modest turnaround. Other indicators, such as concern that customers and suppliers could go out of business, also improved a bit from the extreme levels seen in the second quarter.
“The nature and prolonged duration of the COVID-19 shock means that it is likely to result in permanent changes to the structure and potential growth rates of economies,” said IMA vice president of research and policy Raef Lawson in a statement. “Higher private sector savings may be one outcome: households and companies limit consumption and investment respectively as they remain cautious in the face of extreme uncertainty. This suggests that the public sector may have to run significant fiscal deficits for some time in order to support overall demand. For now, at least mounting public sector debt can be sustained since interest rates are exceptionally low.”
Confidence in Q3 recovered strongly to a three-and-a-half-year high as the deep pessimism caused by lockdowns lifted in most regions. North America appeared to be the most optimistic region surveyed, while South Asia had the largest proportion of respondents not anticipating recovery until next year.
In North America, the orders balance recovered significantly in the third quarter, according to the report, but remains at a record low level,
The report found that confidence in the third quarter recovered strongly to a 3 1/2-year high as the deep gloom caused by lockdowns lifted in most regions; North America is the most optimistic, while South Asia has the greatest proportion of respondents not expecting recovery until next year.
In North America, the report found that the order balance recovered significantly in the third quarter but remains at a record low level, with the exception of the previous quarter. In addition, the increase in confidence this quarter was the biggest quarter-to-quarter increase in the history of the survey, reflecting the turnaround in the economic outlook between June and September.
Overall, results for the North American region are consistent with a reasonably strong recovery in the second half of the year. The second quarter saw some record quarterly falls in gross domestic product, including 9.1 percent in the U.S. The current forecast for quarter on quarter GDP in the third quarter is around 7 percent in the U.S.
Expectations of substantial economic recovery have shifted toward later in 2021 over the past three months, including above 50 percent in North America. Responses to this question indicate the realization that the economic damage caused by the pandemic and the restrictions associated with it are likely to persist well into 2021.
The survey indicated a clear regional pattern, with the strongest access to finance seen in the developed markets of North America and Europe, and the weakest in emerging markets. This did not change between the June and September surveys.
The momentum of the recovery is already showing signs of fading, however. “More generally the continued prevalence of the virus means that social distancing rules and other containment measures will persist for the foreseeable future,” said Warner Johnston, head of ACCA USA, in a statement. “This will adversely affect consumer demand in particular areas. Most economic shocks do not result in permanent changes in economic behavior. But the COVID-19 shock is likely to be different: it already has lasted for the first three quarters of 2020 and will do so well into 2021. This, and the nature and scale of the economic impact, means that permanent changes to the structure of economies are inevitable.”
