Dun & Bradstreet Global Supply Chain Continuity Index Dips in Wake of Geopolitical Conflicts and Climate-Induced Disruptions in Key Shipping Routes
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Insights
The uptick in the Global Business Optimism Index by 6.6% for Q1 2024 is a significant indicator of economic sentiment. This increase suggests that, despite the challenges posed by geopolitical tensions and supply chain disruptions, businesses are demonstrating resilience and a forward-looking approach. The rise in optimism could be attributed to the adaptation strategies that firms have implemented in response to recent economic disruptions, such as diversifying supply sources and investing in digital transformation to improve operational efficiency.
From an economic perspective, this optimism may lead to increased investment and hiring, potentially stimulating economic growth. However, the underlying caution mentioned in the report indicates that businesses are not fully confident in the stability of the current economic environment. This duality of optimism and caution could result in a more measured approach to expansion, with businesses likely to prioritize sustainable growth over rapid scaling.
The report's mention of global supply chain continuity downturn due to geopolitical and climate-related disruptions is of particular relevance. The increased delivery costs and delayed times are symptomatic of a larger issue within global trade logistics. Businesses are now compelled to re-evaluate their supply chain models, with many shifting towards nearshoring or reshoring to mitigate risks.
Moreover, the experience gained from managing disruptions over the past years has likely led to the development of more robust risk management frameworks. Companies are becoming more agile, with a greater emphasis on supply chain visibility and contingency planning. This shift is not only a defensive measure but is also enabling companies to capitalize on new growth opportunities in a volatile market.
The increased optimism among businesses, especially in advanced economies, may have a ripple effect on the stock market. Typically, when businesses signal growth intentions, it can lead to positive market reactions, as investors anticipate better financial performance and higher returns. However, the report's indication of a cautious stance in light of persistent geopolitical conflicts and supply chain issues suggests that any market reaction may be tempered.
Investors would do well to monitor the sectors and companies that exhibit strong adaptability and risk management strategies, as these are likely to outperform their peers. Additionally, sectors that are less dependent on complex supply chains or are beneficiaries of the current geopolitical landscape may offer more attractive investment opportunities in the current climate.
Global Business Optimism Insights report finds higher optimism for Q1 2024 amid push for growth
“Global businesses are now maintaining a balance between optimism and realism and are adopting a more pragmatic stance towards their future. Leaders have endured frequent economic disruptions over the past few years and have become more adept at dealing with them; however, they remain cautious of geopolitical conflicts and supply chain disruptions,” said Neeraj Sahai, President, Dun & Bradstreet International. “This shift in mindset suggests anticipation of additional growth in the forthcoming quarters, albeit with an underlying sense of continued caution."
Business leaders are looking at growth opportunities and risks through multiple lenses, as substantiated by Dun & Bradstreet’s report. While concern remains over the global supply chain, businesses appear to have a higher tolerance for potential risk and greater adaptability, as a result of their experience managing disruption over the past few years. Key findings from the report’s five indices reveal:
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The Global Business Optimism Index increased by
6.6% in Q1 2024 compared with Q4 2023, indicating that businesses in advanced economies now feel more confident about their ability to absorb geopolitical and policy shocks, and are focusing more on growth opportunities.
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The Global Supply Chain Continuity Index fell sharply by
6.3% for Q1 2024 compared with Q4 2023, with suppliers’ delivery time and delivery cost indices both deteriorating. Executives also report that climate-induced disruptions and trade disputes are contributing to decreased optimism. This index declined equally for both advanced and emerging economies, with each receding6% from the last quarter.
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The Global Business Financial Confidence Index increased by
10.1% in Q1 2024 compared with Q4 2023; in addition, liquidity is expected to increase across firms of all sizes and businesses are more optimistic about their competitive positioning, particularly large firms with greater resources employed in liquidity risk management.
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The Global Business Investment Confidence Index rose
10.7% in Q1 2024 compared with Q4 2023. This reading reflects a high absolute level of optimism and a growing consensus that major central banks in advanced economies have reached a peak in the current interest rate hike cycle.
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The Global Business Environmental, Social and Governance (ESG) Index increased
7% in Q4 2023 to 61.9, in contrast to a4.7% decline in Q3 2023, reflecting a positive shift in the commitment of firms worldwide towards sustainability practices. The favorable sentiment towards ESG practices reflects an elevated awareness of sustainability, underscored by the recent agreement among nations at theCOP28 conference.
*Descriptions and information about the indices can be found on page 25 of the report.
"Despite the acknowledgement of economic and political headwinds across the globe, it’s important to note that business leaders are expected to begin 2024 with a relatively positive economic outlook,” said Arun Singh, Global Chief Economist, Dun & Bradstreet. “However, confidence in the resilience of supply chains is facing pressure due to continued geopolitical tensions and climate events. These factors have compelled companies to reroute supply chains, which has led to congestion along transit routes. Business leaders are experiencing both higher delivery costs and delayed delivery times—a reminder of pandemic-related challenges.”
About the Global Business Optimism Insights Report
The Global Business Insights Optimism report is an amalgamation of five indices computed for 32 economies including the Global Business Optimism Index, Global Business Supply Chain Continuity Index, Global Business Financial Confidence Index, Global Business Investment Confidence Index and Global Business ESG Index. These five indices were created by synthesizing findings from a survey of approximately 10,000 businesses in the last quarter alongside insights from Dun & Bradstreet, leveraging the firm’s proprietary data and economic expertise. These indices reflect overall business optimism and expectations about supply chain continuity, financial and investment conditions and ESG initiatives. The indices range from 0 to 100, with a reading above 50 indicating an improvement and a reading below 50 indicating a deterioration in optimism.
View the full report and corresponding records here.
About Dun & Bradstreet
Dun & Bradstreet, a leading global provider of business decisioning data and analytics, enables companies around the world to improve their business performance. Dun & Bradstreet’s Data Cloud fuels solutions and delivers insights that empower customers to accelerate revenue, lower cost, mitigate risk, and transform their businesses. Since 1841, companies of every size have relied on Dun & Bradstreet to help them manage risk and reveal opportunity. For more information on Dun & Bradstreet, please visit www.dnb.com.
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Media:
Dawn McAbee
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Mcabeed@dnb.com
Source: Dun & Bradstreet
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