Regional outlook for Latin America more subdued in first quarter of 2017
SÃO PAULO, 9 May 2017 - Confidence amongst business leaders in Latin America fell slightly in the first quarter of 2017, as the
YPO Global Pulse Confidence Index for Latin America, which tracks economic confidence levels among chief executives in the region on a quarterly basis, slipped 1.2 points, from 58.3 to 57.1. This decline followed the region's three-year high of 58.3 at the end of 2016.
Whilst the overall outlook in Latin America was marginally more subdued, Brazil, which has the heaviest weighting in the region, bucked the trend.
The Index in Brazil jumped 6.7 points, from 55.1 to 61.8, its highest level since the second quarter of 2012. Over the past 18 months, as global commodity prices have recovered and governance has improved, Brazil has seen confidence recover from 38.2 in October 2015 to today's level, back in firmly optimistic territory.
"Brazil is in the process of a turnaround in confidence over the past year, and recent economic indicators suggest that the economy is now in better shape. Chief executives will be looking to develop new strategies to take advantage of current economic conditions and seize on new opportunities," said Patrick Devlyn, MD of Devlyn USC and a YPO member. "Hopefully, we will start to see a ripple effect across the rest of Latin America during the course of the year. Another important consideration in the region is that of Mexico, especially of its heavy trade dependence with the United States. But, after initial nervousness in the market, pressure on local exchange rates have since decreased, and growth projections, although still low, are improving."
Almost every other country in the region saw confidence ebb during the quarter. Mexico, which reported a jump of 7.7 points in the fourth quarter of 2016, saw a slight decline in confidence, losing 1.8 points to 60.8. Columbia, Peru, Uruguay and Chile also reported less positive outlooks in the first quarter.
Globally, the YPO Global Pulse Index for the first quarter of 2017 edged up 0.3 point to 62.5, its highest level since January 2015. For the second consecutive quarter, the United States reported the highest level of confidence in the world, inching up 0.3 point to 64.9. Confidence in the European Union (EU) remained flat at 60.9, whilst Asia climbed 2.1 points to land at 63.3. Africa, the second-least confident region across the globe, edged down 0.3 point to 54.4, while the Middle East and North Africa (MENA) region showed the biggest decline, sliding 4.3 points to 55.2. . Non-EU Europe reported the lowest levels of confidence in the world, falling 2.5 points to 51.8.
Key findings in Latin America
Mixed feelings about short-term economic outlook
Chief executives in Latin America were split when considering how the economic climate is likely to change over the next six months, with 43% of respondents felt that economic conditions would improve while 26% predicted conditions would worsen. A third thought the economic environment would remain largely unchanged. This is a more pessimistic view than in the previous survey conducted in January, when 55% of chief executives predicted an improvement in the economic climate and only 21% felt that conditions would deteriorate in the following two quarters.
Chief executives bullish about revenue growth but more subdued on hiring
Whilst the outlook on the general economic landscape was marginally more subdued in the 1Q 2017, business leaders in Latin America reported increased confidence when it came to sales forecasts. The YPO Sales Confidence Index for Latin America gained 1.2 points to land at 67.8, its highest level since April 2013.
More than two-thirds (70%) of chief executives expected to increase revenues within their organisations over the next 12 months, compared with only 7% who predicted a drop in sales.
The situation was not as positive when it came to hiring intentions. The YPO Employment Confidence Index dropped 2.8 points to 52.1. Less than a quarter (23%) of chief executives expected to increase headcount in the next 12 months, and 16% predicted a reduction in staff numbers. In the January survey, only 7% of respondents predicted cuts in the size of their workforce.
The YPO Fixed Investment Index remained almost unchanged, edging down 0.1 point to 57.0. Of the respondents, 39% predicted increased levels of investment in the next year, versus 11% who expected to cut investment spending.
Key findings in Brazil
Chief executives in Brazil bullish on sales and hiring forecasts
Business leaders in Brazil were extremely confident about the immediate prospects for growth within their organisations. More than three-quarters (80%) of respondents expected to increase revenue over the next 12 months, up from 64% in the previous survey.
Almost one third (32%) of chief executives expected to increase headcount in the coming year, while 60% expected staff numbers to remain flat. In the previous survey, only 16% expected to grow the size of their workforces and 78% expected headcount to remain at the same level.
Economic climate set to improve further
More than three-quarters (77%) of business leaders in Brazil expected business and economic conditions to improve over the next six months, while the remaining 23% predicted that the economic landscape would remain relatively unchanged.
YPO Global Pulse Confidence IndexThe quarterly electronic survey, conducted in the first two weeks of April 2017, gathered answers from 1,216 YPO chief executive officers across the globe, including 81 in Latin America. Visit
www.ypo.org/globalpulsefor more information about the survey methodology and results from around the world.
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