The Index focuses on two main elements for businesses: their ‘outlook’ for the future and their view on the ‘restrictions’ they face. In the first half of this year, it is the ‘outlook’ that has been impacted most, falling by around 17 points during the period. Each of the underlying components tumbled during the period but the fall in economic optimism was particularly sharp, at 21ppt.

The impact on restrictions was less severe, dropping just 13 points compared with H2 2019. It was pulled down primarily by economic uncertainty and to a lesser extent by demand constraints, due to concerns about shortages of orders in the next 12 months. Access our advice on building resilience during this difficult time.

Despite a sharp contraction in the overall outlook, North America’s mid-market remains relatively optimistic compared with other regions., having gone into the period with higher levels of confidence than most. Half of all firms are still slightly or very optimistic about the economic outlook, with the US being more optimistic than Canada.

The index shows business conditions and investment intentions moving in tandem downwards. Our analysis of historic results has shown that these elements are strongly positively correlated and this is shown perfectly here. Revenue and profit expectations, both constituents of business conditions, plunged to record series lows. Only one-third of firms expect to increase profits over the next 12 months, while 37% expect profits to fall.

An area of relative strength is exports, where expectations for the next 12 months were down just 7ppt from H2 2019 and remain well above the 2016-2018 average. This may be linked to final ratification by all three countries of the United States Mexico Canada Agreement, which has now replaced North American Free Trade Agreement.

In line with global patterns, the falls in the components of restrictions are concentrated on demand constraints and economic uncertainty. Supply constraints – encompassing access to finance, labour and regulation and infrastructure – held up well. Similar to Europe, despite widespread fiscal and monetary stimulus measures easing financial conditions in the region, a shortage of finance was stated as a constraint by 45% of firms in North America. This compares with an historical average of just 14%, and is a real concern. Finance is so important to businesses as they trade through this difficult period, or even start-up again after shutdown, and it will be monitored closely in future results.

Scott notes, “There is still a lot of money available to businesses, but valuations have softened and there are concerns about forecasts and uncertainty as to when revenue strength will return and what it will look like. As a result, this has a big impact on securing new financing, especially from independent third-parties.”