Optimism on revenue increase but low expectations on export

A global survey by Grant Thornton of businesses in 36 economies reveals an uplift in the proportion of businesses worldwide expecting increased revenues over the coming 12 months. By contrast, growth in global export expectations continues to be slow, indicating that revenues are dependent on domestic consumer spending power. This power is now under threat from some international macroeconomic elements.

Among such adverse international macroeconomic elements (some of which are unexpected) there is an increased political and economic instability, generated by different geographical areas at the same time: the post-Brexit UK, the political deadlock in Spain, the economic and social integration weaknesses in France, the attempted coup in Turkey, the forthcoming American elections, the brutal and dramatic terrorist attacks in the heart of Europe, the new increase of oil prices, as well as the bearish review of wage policies.

The above being said, this new Grant Thornton International Business Report (IBR) – with interviews with more than 2,500 chief executive officers, managing directors, chairmen or other senior executives in 36 economies, including Italy – shows also positive or improving elements, for example the fact that the lack of skilled workers could invert the negative trend of wage policies, leading to benefits for employment, spending power of workers and households, and revenues for businesses.

In Italy, there are further conditioning and uncertainty elements, as those deriving from the next constitutional referendum and from EU and public policies to handle banks’ non-performing loans, as well as the greater presence, compared to other EU countries, of private investors who own subordinated bonds.

The IBR shows businesses across the world reporting increased expectations for increased revenue (46%, +11pp), selling prices (21%, +4pp) and profitability (36%, +6pp) for the next 12 months in Q2 2016.  In the European Union and Italy respectively, positive expectations are for increased revenue (EU: 43%, +3pp; Italy: 38%, +4%), selling prices (EU: 15%, +8pp; Italy: 8%, +10pp), and profitability (EU: 31%, +3pp; Italy: 28%, +4pp). At the same time, growth in global export expectations for the coming year continues to be weak (EU: 20%, -2pp; Italy: 18%, -6pp).

The IBR also reveals that new employments expectations involve 27% of interviewed sample (+2pp) in the European Union, and 30% in Italy (+16pp), showing a really positive trend.

Among the new challenges that the business community will have to face, there are those related to the trade agreements between the EU and the US and between the EU and China. It will be necessary to quickly reach new agreements in order to make it is easier for businesses to buy and sell internationally while protecting national excellence, including Italian excellence appreciated worldwide. Otherwise, long-term growth plans of businesses could be negatively affected.