Worldwide business confidence has fallen back to its post-crisis low, according to a survey by Markit, a London-based information services company.
Thoughts of the Federal Reserves tapering its bond-buying stimulus this year are premature due to that lack of business confidence, says Markit Chief Economist Chris Williamson.
"The deterioration in business optimism in the U.S. suggests the pace of economic growth is slowing sharply compared to that seen earlier in the year and calls into question the ability of the economy to continue generating jobs at anything like the pace seen in recent months," he said in a news release.
Editor’s Note: Put the World’s Top Financial Minds to Work for You
The survey of approximately 11,000 companies in June found that the net balance of companies expecting their business activity to increase in the coming year minus those expecting activity to fall worsened in June, down to 30 percent from 39 percent in February. It was the lowest levels since late 2009 and equaled a low reached last October.
"The global economy is clearly in a soft patch again, largely reflecting darker outlooks in the US and China," Williamson said.
The drop was largely due to sharply lower optimism in the United States and China, along with "smaller deteriorations in expectations" in the eurozone and Japan.
In the United States, optimism regarding future business revenues, new business and profits all reached post-crisis lows in both the manufacturing and services sectors.
In China, optimism among service was even weaker than at the height of the global financial crisis, but optimism among manufacturers, which merely equaled its lowest level since October 2011, was not quite as bad.
Optimism in other emerging markets was more resilient, although only Brazil saw improvement.
In Japan, the confidence boost from ‘Abenomics’ appeared to diminish, and optimism slipped in the eurozone from its one-year high seen in February. Optimism dipped in Germany and Italy but rose in Spain and France.
Confidence of small business owners dropped in June, according to the National Federation of Independent Business (NFIB).
NFIB's monthly economic index dropped 0.9 percentage point to 93.5. While job creation plans increased slightly in June, expectations for improved business conditions remained negative, the NFIB reported. The index, which was 12 points higher in June than at its lowest reading during the Great Recession but 7 points below the pre-2008 average and 14 points below the peak for the expansion, has been teetering between modest increases and declines for months.
“After two months of incremental but solid gains, the Index gave up in June. This appears par for the course, given that there is no reason for small employers to be more optimistic and lots of things to worry about,” said NFIB Chief Economist Bill Dunkelberg.
Editor’s Note: Put the World’s Top Financial Minds to Work for You
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