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Global outlook gloomiest for two years as optimism slides in Europe and China

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Staff Writer | November 21, 2018
Global business optimism has slipped to the lowest for two years in October, deteriorating in all major economies with the exceptions of Brazil and Russia.
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World   Global business optimism has slipped
Steep falls are seen in the eurozone, the UK and China, the latter two seeing optimism sink to the gloomiest since the global financial crisis.

China signals the weakest future optimism of all countries surveyed.

The US shows the greatest resilience, posting the highest business optimism of the major developed economies, while Brazilian companies are the most upbeat worldwide.

However, the survey also reveals that firms expect to raise prices worldwide at the joint-steepest rate seen since the global financial crisis.

The IHS Markit Global Business Outlook Survey – based on responses from a panel of 12,000 companies – shows that optimists outstripped pessimists by +28%, down from +31% in June and deteriorating further from a three-and-a-half year high of +33% at the start of the year.

The decline takes the overall level of optimism below its long-run average of +34%.

The steepest deterioration in optimism is recorded in the manufacturing sector, where global sentiment about output in the year ahead is down to a survey low.

Sentiment in the service sector shows greater resilience but has also edged down globally to the lowest since June 2017.

Sentiment has waned, and risk aversion intensified, amid escalating concerns over the potential impact of trade wars and tariffs as well as increased political uncertainty, notably in Europe and the UK in particular.

The latest survey also sees heightened concerns regarding rising prices, financial market volatility and the impact of higher interest rates, especially in the US.

The survey shows expectations of profits and employment both fall to the lowest since February last year, though capex intentions are unchanged.

Inflation remains a key theme of the outlook.

Selling price intentions are the joint-highest since October 2009 when combined manufacturing and services data became available.

The steepest increases in inflation expectations are recorded in the US, Brazil and Russia.

Selling prices for services are expected to rise over the coming year at the sharpest rate seen this side of the global financial crisis, while expectations of charges for manufactured goods are the third-highest since mid2011.

Increased selling price projections are seen despite input cost expectations moderating to a oneyear low, easing slightly in both manufacturing and services, mainly reflecting views of lower commodity prices.