Despite the destabilizing effects of the hostilities in the Middle East, economic confidence among global accountants and finance executives rose in the second quarter.
Still, the quarterly Economic Confidence Index, established 15 years ago by the Association of Chartered Certified Accountants and the Institute of Management Accountants, remains in the doldrums after a dismal first quarter.
The confidence index reading for the second quarter was -26.5. It was a notable improvement from the first-quarter reading of -39.5, the third-lowest in the index’s history. But the index has not been above its historical median since early 2022.
The index is calculated as the proportion of respondents who are more confident in the economic prospects facing their organization compared with three months earlier, minus the proportion who are less confident.
Most responses to ACCA and ICA’s most recent economic confidence survey, conducted from June 3-17 with 647 participants, were received before the announcement of a ceasefire in Iran and the reopening of the Strait of Hormuz. Both the ceasefire and the reopening have faltered since then.
“The relative resilience of the global economy, despite the drag from developments in the Middle East, likely contributed to the improvement in confidence,” ACCA and ICA wrote in their report. “The AI boom has been a major support to global growth, amid surging AI-related investment and international trade.
At the same time, large gains for technology stocks have allowed stock markets to reach new highs, the report noted.
But with the overall level of confidence remaining low, the negative fallout from the Middle East conflict appears likely to continue in the coming months, according to the report.
A large majority of CFO respondents (83%) reported increasing costs in the second quarter, with sharply higher commodity prices and supply chain disruptions resulting from the conflict. The crisis could lead the major central banks to further tighten economic policies, the report suggested.
Among all respondents, the proportion experiencing cost hikes in the quarter was somewhat lower than the CFOs’ proportion, at 76%.
Finance professionals actually appear more concerned about economic risks generally than about the conflict per se. Asked to identify their top risk priority in Q2, 22% of survey participants cited economic pressures, ahead of geopolitical instability and cybersecurity.
“Respondents described how understanding today’s risk landscape extends beyond traditional economic-cycle management, pointing to the converging effects of prolonged wars, rising cybercrime and policy uncertainty,” ACCA and ICA wrote.