Businesses see some dark clouds

A recent Dun & Bradstreet report found that global businesses are less optimistic about the economy in Q1 as weak global economic growth, rising geopolitical risks, and trade policy uncertainties weigh on their minds.

The Q1 2025 Global Business Optimism Insights report, conducted in November 2024, found a 12.9% quarter-over-quarter decline in the Global Business Optimism Index for Q1 2025.

Businesses have entered the new year with subdued expectations for Q1 2025 and are grappling with supplier risk as only 51% of businesses expressed confidence in managing supplier concentration risk, compared with 59% in Q4, the report found.

According to the survey, all 32 economies surveyed showed a decline, but, over 90% of the economies still hold optimism levels above the Q1 2024 level, the firm said.

“Survey respondents have a guarded outlook for the quarter ahead due to the evolving economic and political landscape that may impact how the world does business,” said Neeraj Sahai, president of Dun & Bradstreet International. “Optimism levels for supply chain risks vary across business size with large businesses indicating increased optimism and resilience by leveraging their economies of scale and reliance on alternative sourcing.”

Sahai said medium-sized businesses appear to be less able to navigate a quickly changing trade environment, with those businesses reporting a 36% decline in business optimism. Small businesses saw a 3.5% decline.

Over 80% of the economies reported a decline in optimism for new export orders, Dun & Bradstreet reported, with almost half of them having more than 10% trade exposure to either the U.S. or the Chinese Mainland.

Other indexes also fall

The Global Business Optimism Index was not the only index that fell, according to the firm. The Global Business Investment Confidence Index decreased by 4.7%, Global Business Financial Confidence Index declined 8.9%, and Global Supply Chain Continuity Index deteriorated by 10.4% after three quarters of improvement.

Only the Global Business ESG Index rose, increasing 2.4% as businesses continue to focus on sustainability despite challenging economic conditions.

“Businesses have entered the new year with subdued expectations for Q1 2025 and are grappling with supplier risk as only 51% of businesses expressed confidence in managing supplier concentration risk, compared with 59% in Q4,” said Arun Singh, global chief economist at Dun & Bradstreet. “Further, central banks globally are implementing interest rate cuts, yet the cost of capital is perceived to remain elevated, indicating heightened credit risk. This is also accentuated by lower optimism for sales and profitability.”

The weight of tariffs

While the Dun & Bradstreet survey was conducted before the latest tariff news, geopolitical concerns were rising toward the end of the 2024 and appear to be reflected in the decline of optimism. But, according to Suzie Petrusic, senior director analyst in Gartner’s Supply Chain practice, companies need to understand that tariffs and tariff threats, are no longer a one-off event.

“Enterprises should recognize tariff volatility as a multiyear, dynamic event,” she said. “Chief supply chain officers (CSCOs) who recognize this reality should continually evaluate opportunities to invest in strengthening their operations and attract outside investments from geopolitical actors and ecosystem partners.”

Abe Eshkenazi, CEO of the Association for Supply Chain Management, told the Talking Supply Chain podcast in December that tariffs are another disruption that must be accounted for.

“We also had four years of disruptions that have really required almost every company to have appropriate contingency plans from sourcing to production to logistics. This is just another factor that needs to be accounted for in their contingency,” he said.

“CSCOs who anticipate that current tariff volatility will persist for years, rather than months, should also recognize that their business operations will not emerge successful by remaining static or purely on the defensive,” Brian Whitlock, senior research director in Gartner’s Supply Chain practice, said. “The long-term winners will reinvent or reinvigorate their business strategies, developing new capabilities that drive competitive advantage. In almost all cases, this will require material business investment and should be a focal point of current scenario planning.”

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