Study: Inflation growing global concern

Escalating inflation worldwide is increasingly being viewed as the biggest challenge to businesses struggling to recover from the global economic downturn, according to a recent global survey of finance professionals by the Association of Chartered Certified Accountants

Escalating inflation worldwide is increasingly being viewed as the biggest challenge to businesses struggling to recover from the global economic downturn, according to a recent global survey of finance professionals by the Association of Chartered Certified Accountants (ACCA).

“More than half of 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,” said Manos Schizas, senior policy adviser with ACCA, about the group’s Global Economic Conditions surve, which polled more than 2,300 accountants worldwide this March.

Responses suggested 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.

For the first time in the survey, more than half (51%) reported problems with rising operating costs, making that the most commonly cited business challenge.

Only 31% had reported rising costs as being a problem when the question was asked when the survey was last conducted, in the fourth quarter of 2010.

Accountants reported that both demand for goods and services and cash-flow conditions have continued to improve around the world, said Schizas. While this has generally led 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 than during the last quarter as businesses come to terms with the weaker-than-expected recovery, he noted.

Also in the developing world, members saw an opportunity in exports – relying mostly on strong supply chain relationships, investments in quality and also innovation. Respondents in developed markets also reported fewer opportunities in all of these areas compared to previous quarters. Yet they also still anticipate a rise in new orders for their businesses, Schizas said.

The survey also found that government fiscal policy is now seen as more of a balancing act than before, especially in fast-growing markets where rising inflation has reduced the number of options available to policymakers.

Schizas added that almost one in six of the respondents expected their national governments to get spending dangerously wrong over the next five years.

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