Uncertain times for business

For the first time in a long time, the Ghost Month does not seem to hold any special meaning at all.

This year, the Ghost Month is observed from Aug. 19 to Sept. 16, with the Ghost Day festival scheduled last Wednesday (Sept. 2). The Chinese believe that the Ghost Month is not a good time to make huge, life-changing actions, like starting a new business or a new job, getting married, or making big purchases. They believe that the gates of hell are open during this time of the year and that ghosts wander among the living.

It seems that the whole world has been in suspended animation since the start of the pandemic, postponing huge decisions until things get better, especially for the economy. Many businesses are barely surviving and are just making sure that they stay afloat until the situation normalizes. As they say, there is no way to go, but up. The problem is, will it still get worse before it becomes better? Or have we seen the worst of it?

The Economist Intelligence Unit’s Global Business Barometer (GBB) just came out with the third edition of its survey, fielded in June, which tracked the sentiments of business executives globally amid the current COVID-19 pandemic.

The survey showed sentiments improving, but remaining firmly in the negative. Their best hope is that the global economic recovery will be U-shaped, but even then it may look like an odd, stretched-out U, with the bowl area at the bottom expanding far to the right before the eventual upstroke, it said.

Interestingly, the report noted that three editions into the GBB (the first done in April, the second in May, and the third in June), it now has its first positive barometer reading for any economy, and that is for China.

The survey explained that the three-month outlook for the Chinese economy among China-based executives tipped into “somewhat better” in June, though only just at positive two. This, it said, is in stark contrast to the last GBB, when the outlook soured by negative 21.9, by far the most among the 12 main economies surveyed. While the survey was fielded in June, the Chinese government’s recent announcement on July 16 that GDP has grown by 3.2 percent shows this turn towards optimism was justified, it added.

It also revealed that sentiment about the global economy in North America barely improved, but still in the negative (minus 24.5 in June), moving up just 1.5 points (from minus 26 in May to  minus 24.5 in June), which the report said is not surprising given the surge in US COVID cases and the widespread and virulent disagreement in government and among the populace about the severity of COVID-19 and how to contain it, which isn’t helping executives’ confidence.

The third GBB also revealed that the three-month outlook for the global economy moved from “much worse” into “somewhat worse.”

It said that between the first (April) and second (May) GBBs, there was a pronounced dip in sentiment among executives across the key industries surveyed, particularly regarding revenue growth and profitability. There was a rebound in sentiment in June, while short of matching the depth of the April-May drop, was significant nonetheless. “On average, scores across all industries were up by 15.7 points. Healthcare improved by 23.3 points on the outlook for profitability and became the first positive industry in that area with a reading of 1.9. Meanwhile the sector’s global sentiment on revenue growth is a shade away from zero at -0.5. Regarding profitability, financial services saw an even larger improvement of 24.6 points from June, though that was only enough to drag it to a clean zero reading, meaning no change is expected over the next three months,” it explained.

Meanwhile, the June-conducted GBB survey also revealed that the public sector and manufacturing industry remain the most pessimistic, although sentiment did rise for both.

When asked what are the greatest opportunities for post-COVID resilience, the top five answers are greater digital agility, better customer experience, more innovative offerings, more informed strategic planning, and more product working environments. The GBB report said that the emphasis on digital agility above all else is understandable since without digital tools, many companies would have ceased to function during the lockdowns.

But the report expressed worry that strategic planning and business continuity was somewhat lower down the list. It said that given that a global pandemic was not an unknown risk prior to COVID-19, few seemed prepared, often resulting in a scramble for ad hoc solutions, digital being chief among them, rather than a methodical, step-by-step response.

The GBB, supported by analytics leader SAP, said that in a small number of economies, and an even smaller number of industries, it may be V-shaped recovery, but they are likely to be the exception. “Everywhere else, the current trend in the GBB suggests we can expect a U, probably some Ws and an assortment of other odd shapes that don’t fit into a model,” it pointed out.

But the report emphasized that much depends on the ability of countries to reopen in a way that ensures, to the greatest pos;sible extent, that they won’t need to close again. With only 8.1 percent of respondents to the June GBB survey strongly agreeing that their country is ready to open and only 6.7 percent strongly agreeing that their company is ready to return to operating as it had done before the pandemic, GBB said these figures are chilling whether they are read as recognition of the scale and scope of the problem, or an indictment of global and country-level responses to COVID-19, or some combination of the two.

GBB ended the report by saying that for them to improve will require not only the discovery, production and distribution of a vaccine, vital as that is, but for more leaders and policymakers around the world to demonstrate to everyone that they can be more effective in containing the virus.

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