Outside Unrest and Disasters, Sentiment on Economy Seems to be Improving

The outlook for worldwide manufacturing and services seems to be looking up, according to the latest survey of executives by KPMG, though the sharply higher optimism failed to account for current events in the Middle East and Japan.

In the spring 2011 Global Business Outlook survey, confidence was seen growing among business professionals across Europe and the U.S. Of those in the service industry, 55% of respondents predicted an improvement in business activity within the year. Only 8% anticipated a decline. The results vary drastically from the winter survey, where the percentage fell across many indicators.

The manufacturing sector saw record highs across four of its top five indicators since the survey became global in October 2009.

“I think the most encouraging aspect of these numbers is that the recovery is worldwide,” said Alan Buckle, Global Head of Advisory at KPMG. “China and the other high-growth economies are no longer alone to blaze the recovery trail.”

The economic recovery has so far been fragile, but Buckle attributed that to previously lacking wholesale support from the U.S. and Europe. With their recoveries, he said, the economic improvement has solidified.

Despite the improved results, however, the survey fails to wholly account for current global events, such as mass protests in North Africa and the catastrophic earthquake and tsunami in Japan, both of which have impacted oil prices and shaken markets.

“We have yet to see the impact of the tragic events in Japan,” he said. “Let’s hope that for business as well as human reasons, events in Japan are quickly under control and this confident survey isn’t invalidated.”

While some companies, such as cigarette maker Philip Morris (NYSE:PM), are expecting to escape from the tragic events in Japan largely unscathed, others such as Toyota (NYSE:TM) were forced to temporarily halt operations. Because of unrest in the Middle East and rising oil prices, meanwhile, the transportation industry has been pummeled, pushing airline companies such as American Airlines (NYSE:AMR) to increase ticket prices.

Outside current events, other problems remain, such as inflation, and specifically the rise of commodity prices such as oil and food. General Mills (NYSE:GIS), for example, said last week that it anticipates higher prices for its products down the road because of higher costs.