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The Global Business Confidence Index, a newly developed indicator of confidence among international business decisionmakers, may become a useful forecasting tool for business leaders involved in international trade, as well as international investors, supply-chain managers, policymakers, money managers, and financial analysts.
The index, based on the results of a survey of 1,667 international business leaders, assesses current confidence levels among international business leaders, documents recent trends in confidence levels and forecasts future changes. The inaugural report indicates that current confidence in world markets is strong and growing, but that perceptions of confidence vary among U.S. and non-U.S. respondents.
One of the survey’s key findings is that American respondents are more confident in today’s market (37.7%) than their non-American counterparts (28%). More respondents from non-U.S. companies (33.9%) said their confidence was lowest during the past five years compared to their American counterparts (25.5%).
Stephen Coelen, managing director of the World Institute for Strategic Economic Research (WISER), developed the algorithm used to create the index. “We formulated the survey questions in order to measure both current levels of confidence and changes in confidence over time,” he said. “The result is a new and unique perspective on global business confidence as it relates to key economic factors.”
“The Global Business Confidence Index survey is designed to measure the business ‘confidence’ of U.S. exporters, as well as importers of products and services from the United States,” said Gregory Sandler, president of ThinkGlobal Inc., publisher of the index. “The survey data will be updated quarterly, and the results will allow us to gauge global business perceptions about the current condition of the world economy, as well as historical trends and anticipated changes.”
According to the index, the overall confidence in the world economy increased by 35 points during the past two years, and is projected to continue increasing before leveling off in 2009.
Both U.S. and non-U.S. respondents ranked the U.S. exchange rate as the most significant factor affecting confidence.
In addition to measuring levels of confidence, The Global Business Confidence Index also measures key factors that affect changes in confidence over time and identifies variations in perceptions between U.S. and non-U.S. respondents.
“Knowing what influences confidence is not the same as knowing what factors make the level of confidence grow or shrink,” said Coelen. “We analyzed what factors influenced the increase or decrease in confidence to see the relative importance of various potential influences. While the exchange rate is an important factor in the level of confidence, it does not appear to be an important factor in determining the movement of the index.”
Overall, the index shows that U.S. business confidence in the global economy increased more rapidly than non-U.S. confidence during the past five years. Conversely, non-U.S. confidence is projected to increase more rapidly during the next five years.
The index is designed to become, over time, a valuable indicator for joint venture, supply chain and international investment opportunities. The value of confidence indices has been recognized by experts worldwide. In particular, a report published by the Organization for Economic Co-operation and Development (OECD) noted that “significant changes in growth (are) unlikely to be sustained if not rapidly accompanied by a large change in confidence.”
The index is published by ThinkGlobal Inc. in partnership with WISER, the Center for International Business Education Research (CIBER) at the University of Connecticut, and Commercial News USA.
For more information, visit www.globalbusiness.info.