In this first of a two-part series, Dr. Jay Bryson, Wells Fargo Securities Global Economist, lends insight into the Wells Fargo survey and tells us just how optimistic U.S. businesses are who do business globally.

 

Brian Jacobsen: I’m Brian Jacobsen and you are listening to On the Trading Desk®. Wells Fargo conducted an International Business Indicator survey, and we’ll refer to it as the IBI from here forward. It measures U.S. company sentiment around plans for international business. The IBI survey includes a proprietary indicator score which provides a relative measure of optimism. Well, the results are in and it shows businesses are as optimistic as ever.

Here to discuss the survey, the findings, the results, and what it means is Dr. Jay Bryson, Global Economist with Wells Fargo Securities. Jay, thanks for joining us!

Jay Bryson: Well, good morning Brian, and thanks for having me.

Brian: In this first of a two-part interview, let’s lay the framework for the IBI survey. Then, in part two, we’ll dig into the finer points of the findings and what they mean.

Jay: Yeah, sounds like a good idea, let’s do it.

Brian: So let’s start with the design of the IBI survey to get people familiar with it.

Jay: This survey has been done on an annual basis for the last four years, so, since 2014. I guess what the interesting thing here is, this was the first time it was done during a presidential election. But this index really boils down to the two sort of major questions. The first is, you know, they’re trying to capture how much international component of a company’s business will change, you know, in the next 12 months. But then the second part is how much will this international component become more or less important to a company.

Brian: Interesting.

Jay: And the way the things work is it ranges between zero and 100, okay.  So zero is absolute negative outlook, 50 is kind of neutral, and then 100 would be the absolute, most positive that you can get. This year there was about 281 companies that were interviewed, and these companies would have revenues of $50 million and higher. And so there were some companies in there that would be, you know, billion dollar sort of companies.

Brian: Were these the decision-makers at the firm, typically, reflecting their views?

Jay: Yeah. So these people would tend to be people who are involved in the international components of their business, not necessarily the CEO but, you know, it would be somebody in the treasurer’s office, the CFO, somebody of that type.

Brian: Can you give us a feel for the timeframe in which the survey was done?

Jay: It was a fairly wide time frame.  It was actually a two-month window, starting on November 14 of last year and going through January 24 of this year, and so, you know, this was right after the presidential election and a few days after the inauguration. And I think what’s kind of important was, you know, when you think back to the month or two right after the election, the stock market really surged, a lot of optimism there. And as I think we’re going to talk about here in a little bit, maybe some of that optimism is being captured here in our survey results as well.

Brian: Alright. So in terms of the results, just how optimistic are these U.S. businesses who have plans for doing business internationally, or are doing business internationally?

Jay: The score for 2017 was 74. Now, just to put that number into context, back in 2014, the first year of the survey, it was at 68. The next year is 2015, 63; last year 65, and then it jumped all the way up to 74. So this is the highest, and when you drill down a little bit further, it’s really two components. When businesses are looking out over the next 12 months, 81 percent of those businesses said that their international businesses would increase either A, a little or B, a lot. Okay? And so last year only 65 percent said that. And then when you look at how much more important to their overall business will it be? Again, a number like 80 percent also said it was going to become somewhat more important or a lot more important. And last year that was only 54 percent. So, pretty optimistic readings in terms of international business.

Brian: That’s fascinating. Can you identify contributors for what might be driving this optimism to new heights?

Jay: Well, I think what it’s consistent with, Brian, is when you look around the world right now you do see economic activity starting to pick up. So if you look at China, you know, things are starting to pick up in China again. We see that in the hard data. That’s probably consistent with what’s going on with this indicator here and the same thing when you look at say the eurozone—you are starting to see some economic activity accelerate there. The other thing that’s probably going on here is just from the election. And there are other sorts of business indicators out there, soft data, if you will, that have also picked up a pretty big increase in optimism as well. And so I think those things are contributing to it.

Brian: That’s all very interesting. Well Jay, let’s break here and we’ll finish this conversation next week.

Jay: Ok, sure!

Brian: I’ll let our audience know that they can access the full IBI survey on our blog AdvantageVoice®. For now Jay, thank you very much.

Jay: Thank you Brian.

Brian: And until next time, I’m Brian Jacobsen; stay informed.

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