Business climate surveys are a big deal in parts of the world where time plays more than a customary role in the movement of markets.
It is such a big deal in Germany, for example, that it has been conducted on monthly basis since 1949 — and yes, the European markets respond to the sentiments of the 7000 enterprises that currently make up the survey’s respondents since that country is the largest economy in that part of the world.
“The European stock markets fluctuate if the survey shows an unexpected development. Even the euro fluctuates,” says Prof. Siegfried Schoenherr, a man appointed by the Federation of German Industries to help the Association of Ghana Industries (AGI) improve its own survey methodologies.
These days, there is even a European law that each member-country has to have a business climate survey.
“Research is so important: businesses need it, economic analysts need it, policymakers need it; everybody needs it,” Prof. Schoenherr said.
After the Second World War,he recounted to the B&FT, the German economy was developing so fast that official government statistics could not keep up with the pace of development. As such, a group of smart non-government actors came up with the idea of the business climate survey.
“It took us ten years to develop the survey to the standard we wanted,” he said, indicating that an independent, frequently-conducted survey like that serves the very important purpose of being “an early information system” in an economy.
“It provides data much earlier than any other statistical office, where very important data tend to be available only after a year or even longer. It enables policymakers to make appropriate decisions at an early time. You can control the impact of changes. Good indicators indicate reality; they indicate GDP developments…of course, it will be supported by other forms of data,” he said.
“If you ask the opinion of 400 CEOs” as the AGI does, “it is very important; these are business experts. Most of these answers are correct.”
The Federation of German Industries makes use of data from the IFO Institute for Economic Research, a Munich-based research institution that conducts Germany’s Business Climate Index. About half of the institutes 200 members of staff are researchers.
Through a collaborative programme, the German Federation appointed Prof. Schoenherr to help the AGI fine-tune its own index.
The professor visits every now and then to hold seminars with AGI staff. Through his help, the base index for the AGI survey has moved from where everything was in a zero line to a base index of 100, below and above which business confidence is measured.
He also helped introduce two other variables to the AGI barometer — business sentiments on the growth of employment and of exports.
The AGI is also in discussions with him to introduce surveys specific to each of the ten regions of Ghana.
The Business Barometer Indicator measures the level of confidence in the business environment by simply expressing the state of the business climate numerically in one figure, with 100 as the base index.
In the 2014 fourth quarter results, overall business confidence picked up from a low of 42.0 to 98.0, which the AGI considers to be significant even though it is still below the base index.
On employment, CEOs did not envisage the first half of 2015 to be a period for expansion of labour, as 73% said they did not intend to increase their workforce on account of unfavourable economic conditions.
As many as 56% said they are unsure of what conditions will be like in the next six months. Only 27% who are slightly optimistic anticipate increasing their workforce in six months.
According to Prof. Schoenherr, policymakers cannot afford to ignore the sentiments of business people since they are the backbone of economies.
“If the business community is doing well, all others will do well,” he said, urging the AGI thus: “If you continue to work along these high quality lines, the AGI Business Barometer Index will become a highly useful source of information