Will 2017 be a better year for business? According to a recent survey by American Express and Institutional Investor of 650 senior finance executives in 15 countries, the answer is yes.
Economic optimism among large companies (those generating $500 million or more in annual revenue) is at its highest point since the global recession a full decade ago (see Figure 1), according to the 2017 Global Business & Spending Outlook by American Express & Institutional Investor. Seventy percent of all finance executives surveyed expect their home countrys economy to expand at least modestly in 2017 (up from 64 percent in 2016), with the largest proportion of respondents around the world since the inception of the study predicting substantial expansion.
The survey found that global business spending, investing and hiring are broadly expected to increase this year. Companies plan to focus their resources on meeting increased demand for goods and services, and on honing their competitive edge.
Optimism Abounds in North America and Asia
North American executives based in the U.S and Canada are the most optimistic, followed by Asian executives. The proportion of North American executives anticipating substantial expansion leapt from 22 percent last year to 67 percent this year (see Figure 1), as U.S. respondents anticipate streamlined regulations and potential corporate tax reductions; and rising commodity prices boost Canadas energy and mining sectors.
The proportion of Asian finance executives anticipating substantial expansion increased from 13 percent in 2016 to 44 percent in 2017, with Japan (57 percent) a particularly bright spot in light of recent GDP growth.
Expectations Lag in Latin America and Europe
Senior finance executives based in Latin America are less enthusiastic about their countries prospects. Only 30 percent of respondents in Mexico predicted substantial economic growth over the coming year, compared with 46 percent in 2016.
In Europe, only 11 percent of respondents anticipate substantial expansion in the coming yearon par with 12 percent last year. Post-Brexit vote, U.K. executive sentiments are at a low ebb, with only 9 percent anticipating substantial expansion this year, down from 19 percent last year.
Spending, Investing and Hiring to Drive Growth
Spending, investing and hiring align somewhat with growth expectations in the 2017 Global Business & Spending Outlook. Although weighted average expectations for spending and investment by region are similar, the European forecast lags slightly behind others.
In general, these results suggest that companies worldwide are preparing to address expanding business requirements and opportunities.
Where Will Money Go?
Respondents expect increased spending on production and deliveryincluding production inputs, labor and logisticsas their businesses prepare to meet rising demand. The back office will also see increased spending to help improve administrative efficiency. The net percentage of respondents who expect to invest along those lines rose significantly (35 percentage points), from 6 percent last
year to 41 percent this year.
Talent investment is also anticipated, with global executives predicting an overall increase in hiring. North American executives on average predict the largest increase in the number of employees, followed by European respondents.
Support, general administration and finance categories reign as the top three global priorities for hiring and retaining talent. To attract talented people and keep them happy, companies are more likely to focus on non-monetary benefitssuch as a pleasant work environment and flexible schedulesrather than wage increases or improved benefits.
Businesses Invest to Maintain Their Competitive Edge
As global executives gear up for growth in the coming year, the top business goal for 2017 is to remain competitive with other companies. To that end, 90 percent of respondents overall say their companies will need to substantially increase spending and investment to stay competitive.
Eighty-six percent of respondents agree that pressure to compete on the basis of customer service has increased over the past two years. Meeting the demands of todays customers includes addressing environmental, social and governance-related concerns. Nearly one in five respondents confirm that sustainable, ethical and transparent business practices are currently very important to their ability to compete, and another 70 percent respond that these practices are somewhat important.
Despite some regional variability in economic outlook, companies around the world are also investing in back-office efficiency and administrative support. Survey results show that companies continue to focus on protecting the bottom line to both deliver and receive value amid brightening overall prospects.
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