The Q2/20 Global Economic Conditions Survey (GECS) from the Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA) found that while 2020 will be the worst for the global economy since World War II, North America is more optimistic about an imminent economic recovery from the COVID-19 pandemic than other regions across the globe.

The survey found that global confidence recovered slightly from a record low in Q1/20, providing some optimism that recovery is on the horizon during the second half of the year. Despite this, many regions across the globe still face challenging economic times.

The Q2/20 GECS is a regular economic survey of accountants around the world. The full report is available here.

The report notes that activity indicators covering orders, capital spending and employment are at or close to record lows in most regions and that the global orders balance fell by 15 points, around twice its previous biggest quarterly drop, while other global measures of extreme weakness include a plummeting employment index and the rise in concern about customers and suppliers going out of business.

The economic shock of the COVID-19 crisis is shifting unemployment rates from close to record lows late last year to extreme highs in the space of a few months. In the U.S., the report notes, the unemployment rate rose to 13.3% in May from below 4% at the start of the year (but improved slightly to 11.1% in June, per the U.S. Department of Labor).

The report notes that headwinds for recovery are likely to remain in coming quarters amid social distancing and consumer caution. Earlier expectations of a sharp V-shaped recovery have given way to anticipation of a fairly long period to regain the level of output prior to the pandemic. For emerging markets, much will depend on commodity prices as well as the strength of any recovery in advanced economies. The authors note that for many economies, including the U.S., it may not be until the second half of 2022 at the earliest when the country could reach the same level of output as existed at the end of 2019.

Yet, despite the troubling findings, respondents in North America were optimistic about a recovery. The survey found that over a third of respondents in North America expect a recovery during the current quarter spanning July to September.

“Confidence in Q2 was a mixed picture and globally there was a modest bounce from the record low in Q1,” Raef Lawson, vice president of research and policy for the IMA, said. “This unusual combination of very weak orders but slightly better confidence can be interpreted as expectations of a turning point – an unprecedented collapse in activity in the first half of the year, to be followed by some degree of recovery in the second half.”

The new survey introduced special COVID-19-related questions, which generated an overall 50-50 split between those expecting economic recovery in the second half of this year and those not expecting it until 2021.

“The mixed picture on confidence contrasts with the universally gloomy readings on activity indicators such as orders and employment,” Warner Johnston, head of ACCA USA, said. “Recovery in confidence from Q1 lows can be interpreted as optimism about economic prospects over the second half of the year. In regions such as North America and Europe, the recovery in confidence was modest but in stark contrast with the large fall in orders in both regions.”

The report also notes that the plunge in the GECS employment index reflects the dramatic surge in unemployment, particularly in the United States, and reasons that this is a downside risk to sustained recovery.

While overall confidence ticked up slightly from a record low in Q1, hinting at a slightly brighter outlook, the portrait for 2021 depends on the trajectory of the virus.

“On the assumption of no second wave of the virus that requires renewed lockdown measures, the global economy will recover in the second half of this year and through 2021,” Lawson said. “But the pace of expansion in 2021 is highly uncertain and will depend on developments in the health crisis, such as treatments or a vaccine as well as on economic factors such as policy, and consumer and business confidence.”

“More generally, the degree of so-called scarring will become apparent; how much permanent damage has been done to economies and certain sectors such as hospitality, travel and tourism – and crucially how far and fast is unemployment falling across economies,” Johnston said. “It is unlikely that growth will be sufficient to lift the level of economic activity to its pre-crisis level by the end of next year.”

Fieldwork for the Q2/20 GECS took place between May 29 and June 12, 2020 and attracted responses from 1,070 ACCA and IMA members around the world, including more than 100 CFOs. The COVID-19 questions elicited 805 responses.