Businesses in the Asia-Pacific region suffered the sharpest drop in confidence globally in the second quarter of this year, a new survey has found. One big reason was lower demand from Chinese customers as growth slows in the world's second-largest economy.
"Slowing demand from China for construction materials has hit not only commodity producers in the region, such as Australia, Indonesia and Malaysia, but also the services-heavy economies of Singapore and some Australian cities, which have grown up around the wealth generated by the commodity trade," said Ms Leong Soo Yee, the Asia-Pacific director of the Association of Chartered Certified Accountants (Acca).
The Global Economic Conditions Survey, organised by Acca and the Institute of Management Accountants (IMA), polled over 950 financial professionals, such as accountants and chief financial officers, worldwide. Respondents were surveyed between May 29 and June 16.
Following weak economic data from China in the first quarter, nearly two-thirds of respondents working in firms in the Asia-Pacific reported that there were now fewer profitable opportunities to exploit. Globally, the survey found that business confidence has levelled off after six months of improvement.
Aside from the slowing Chinese economy, which is affecting businesses worldwide, many businesses in the United States were affected by severe storms, port disruptions and a strong US dollar, Acca and IMA said in their survey report.
"Over the course of the rest of the year, it is likely that we will see confidence rise again, with stronger fundamentals re-emerging in the US and Western Europe," they added.
Companies are also cautious when it comes to hiring, with 41 per cent of respondents saying that they cut staff or ceased recruiting during the second quarter.
The main negative impact of shifts in the global economy over the past three months was a rise in costs, cited by 46 per cent of businesses surveyed.
Foreign exchange movements were also cited as a problem in the second quarter by 32 per cent of respondents. Large businesses were affected more badly - 35 per cent of them said forex volatility was a challenge to business during the quarter.
Looking ahead, the outcome of the Organisation of the Petroleum Exporting Countries' next meeting on whether to curb oil supply, the extent to which Indian Prime Minister Narendra Modi manages to implement his reform programme for India, and the ongoing negotiations between Greece and the rest of the euro zone will be issues which could have a huge impact on business confidence in the second half of the year, the report said.