Business confidence is down, but not negative

Arabian Business’s new Business Confidence Index traces the sentiments of regional businessmen and managers

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By  David Ingham Published  December 19, 2001

Business Confidence Index|~||~||~|Business confidence has been evaporating in the Middle East throughout this year, and has merely continued this trend in the wake of the September 11 terror attacks.

Slumping global stock markets and uncertainty over whether the US and Europe will tumble into recession appear to have had the greatest effect on confidence.

Overall, projections for revenue growth have been halfed over the course of the past 10 months. In the first quarter, the market consensus of +2 translates roughly into growth expectations of 20% over a year. By the end of October, this had been cut to a rating of 1.06, or just over 10% growth.

Since this is the first month of the Arabian Business Confidence Indicator, we have had to ask respondents to ‘remember’ how they felt about revenue and expenditure during this year. This unscientific approach was used simply to give some historic perspective to today’s data.

Perhaps the most important trend this process has identified is that people have tended to over-estimate future growth (it is highly unlikely that the market would have grown 20% overall this year, as predictions from the first quarter suggested they would). Today’s expectation of 10% growth over the next 12 months is probably also on the high side.

Spending is expected to increase at roughly the same rate as revenues in the Middle East. The market is still expecting to increase headcount and fixed cost expenditure, although it is going to be marketing and IT spending that see the largest increases.

The Business Confidence Index will become a regular feature of Arabian Business.
||**||Methodology|~||~||~|The Arabian Business Confidence Indicators are generated from an online survey on www.itp.net and an e-mail shot to 1000 senior managers from the Arabian Business magazine database. This month’s survey was conducted from October 14-28.

To give some historical perspective to today’s level of business confidence, we asked respondents to recall how confident they felt in the first three quarters of this year. While this is hardly scientific, it does give us some insight into how confidence has changed over time.

These indicators measure expectations on a scale of -3 to +3. The highest rating of +3 indicates an overall market expectation of over 30% growth.

The lowest rating of -3 indicates an overall market expectation of over 30% contraction. A rating of around +1, therefore, indicates an overall market expectation of around 10% growth.

Data for spending expectations refers to the next 12 months, starting from October 2001. Again, the highest rating of +3 indicates an overall market expectation of over 30% growth.

The lowest rating of -3 indicates an overall market expectation of over 30% contraction. ||**||

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