**London**: The Global Business Optimism Index has dropped by 12.9%, signalling a cautious sentiment among businesses amid changing economic conditions. Medium-sized firms report the steepest decline, while large businesses exhibit improved resilience. Challenges are attributed to geopolitical tensions and rising operational costs.
In a recent report by Dun & Bradstreet, the Global Business Optimism Index experienced its first noted decline since its inception, dropping by 12.9% as businesses worldwide adjust to an evolving economic and political landscape. Particularly noteworthy is the shift in sentiment that reflects a more cautious approach to supply chain stability and investment strategies, significantly driven by anticipated policy changes under the new U.S. administration. Despite this downturn, optimism levels remain above those recorded in Q1 2024 for 30 out of 32 surveyed economies, suggesting that the decline signals a correction from previously inflated expectations rather than a wholly negative outlook.
“Survey respondents have a guarded outlook for the quarter ahead due to the evolving economic and political landscape that may impact how the world does business,” noted Neeraj Sahai, President of Dun & Bradstreet International. This cautious sentiment is particularly pronounced among medium-sized businesses, which saw the sharpest decline in optimism at 36%. These businesses are facing challenges related to cross-country trade and local supply shortages, emphasising the importance of maintaining a stable supplier relationship amidst these market pressures. In contrast, large businesses reported an increase in optimism and resilience, leveraging their economies of scale and alternative sourcing strategies.
The report further highlights the deterioration of the Global Supply Chain Continuity Index by 10.4%, a reversal following three quarters of improvement. This decline is attributed to ongoing challenges including high freight costs, container shortages, and geopolitical tensions. While optimism among large businesses improved by 10.7%, medium-sized businesses lagged, with 66% of respondents reporting lower optimism levels. Small businesses experienced only a moderate decline of 3.5% but retained some optimism regarding delivery times and costs, largely due to their capability to source locally and adjust production locations.
The report indicates that over 90% of economies surveyed reported a decline in new export orders, correlating with increased trade exposure to critical markets such as the U.S. and the Chinese Mainland. Furthermore, the Global Business Financial Confidence Index fell by 8.9% across both advanced and emerging economies, mirroring concerns about the macroeconomic environment, weak demand, and the rising risks faced by smaller firms. Notably, large businesses maintained improved optimism, with a 12.7% rise in financial confidence.
In terms of investment confidence, the Global Business Investment Confidence Index saw a decrease of 4.7% yet remains above its five-quarter average due to commitments from central banks to lower policy rates. Interestingly, M&A activity appears to be a robust element within the current environment, with 78% of businesses optimistic about future conditions for mergers and acquisitions.
Despite these operational challenges, businesses are showing increased focus on sustainability, as evidenced by a 2.4% rise in the Global Business ESG Index. This is particularly highlighted in the automotive sector, where budget allocations for sustainability initiatives are being influenced by differing strategies in the U.S. and the European Union.
“Businesses have entered the new year with subdued expectations for Q1 2025 and are grappling with supplier risk as only 51% of businesses expressed confidence in managing supplier concentration risk, compared with 59% in Q4,” stated Arun Singh, Global Chief Economist at Dun & Bradstreet. The complexities of current economic dynamics, coupled with central banks reducing interest rates, continue to create a challenging environment for businesses as they navigate these fluctuations while aiming to build strong, resilient supplier relationships.
Source: Noah Wire Services
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