U.S. business leaders’ optimism reaches highest level since 2005

Optimism for the nation’s economic outlook among U.S. business leaders rose to a net balance of 55% in second quarter 2013 from 31% in the previous quarter. This is the highest level recorded since 2005, according to the latest data from the Grant Thornton International Business Report (IBR), a survey of 3,200 business leaders in 44 countries.

In a recent interview, Dominic King, global research manager for Grant Thornton and head of the IBR, said manufacturing businesses also reported optimism significantly above the U.S. all-business average.

“It is surprising to see such confidence given that the economy is still in recovery,” said King. “But aside from a dip in confidence surrounding the fiscal cliff, the overall trend in the U.S. has been toward growing optimism.”

While U.S. businesses are feeling more confident about growth in their operations and the economy, optimism among business leaders in the world’s second largest economy slumped to the lowest level recorded in IBR history. Business optimism in China fell to a net balance of just 4%, down from 25% in first quarter 2013. “China is now shifting from a focus on export to more consumption,” said King. “Still, increased optimism in the U.S. should boost confidence in China, so it will be interesting to see what happens in the next quarter.”

Business sentiment also dropped in the other BRIC economies, with business leaders’ confidence in those countries sliding from net 48% in first quarter 2013 to 23%. Eurozone business confidence continues to remain fragile, dropping to net -8% in second quarter 2013, from -2% in first quarter 2013. However, there was an overall improvement in G7 business confidence, with optimism in the United Kingdom climbing from net -1% in first quarter 2013 to 34% in second quarter 2013. Sentiment in Japan turned positive for the first time in IBR history, rising to net 8% from -2%.

King said globalization is creating more opportunities for countries such as Germany, who is looking further afield for opportunities given the struggles of neighbors in the Eurozone. But he also noted many economies were looking more closely at their own consumer bases to drive growth. “For instance, the United States is looking at more self sufficiency with shale oil discoveries and the like, which also has an impact on global export activity,” said King. “The financial crisis makes certain economies evaluate where they’re looking for growth opportunities.”

The improving U.S. sentiment also extends to U.S. business growth expectations. Net 59% of businesses expect to see revenues climb during the next 12 months, up from 46% in first quarter 2013. A net balance of 48% of business leaders expect profits to grow, up from 42% for the previous three months. Hiring expectations in the United States also remain above the global average with a net balance of 33% of business leaders foreseeing an increase in hiring during the coming year.