Optimism and Supply Chain Risk

The Dun & Bradstreet Global Business Optimism Index, based on a survey of 10,000 businesses, was down 12.9 percent for the first quarter (Q1) of 2025, compared to Q4 of last year. The good news? Year over year, global business optimism is up 12 percent.

According to the global business services company’s Global Business Optimism Insights report, “While this downturn highlights growing concerns over weak global growth, rising geopolitical risks and uncertainty surrounding trade policy, the broader trend suggests a correction from previously elevated optimism levels rather than a bleak outlook.” 

Arun Singh, Dun & Bradstreet’s chief economist, said the current global environment is characterized by protectionism. “Data from the World Bank shows that the number of new trade policy measures introduced between 2022 and 2024 is more than three times the level witnessed between 2017 and 2019,” he said during a conference call with reporters.

Imports, Exports and Capital Expenditure

Optimism level pertaining to export orders and inventory levels suffered in Q1, which Singh called “not surprising” given the speculation about potential U.S. trade policy changes when the survey was conducted. Ongoing supply chain challenges and labor market realignments have further dampened confidence among businesses worldwide, he said.

“Globally as well as domestically in the U.S., it appears that businesses now expect to take more days to churn their inventory, leading to a subsequent deterioration in optimism on inventory levels,” Singh said.

The industries least optimistic about inventory levels in Q1 were food and beverage products and chemical products.

Businesses remain cautious about capital expenditure, Singh said, for three main reasons: (1) the uncertain economy, (2) unfavorable economic conditions for raising capital and (3) declining capacity utilization. “Only 63 percent of U.S. businesses view the environment for raising capital as favorable in Q1 2025, which is much lower than the 78 percent of businesses of Q4 2024,” he said.

Supply Chain Implications

According to the report, Dun & Bradstreet’s Global Supply Chain Continuity Index declined 10.4 percent from Q4 to Q1, with midsize businesses experiencing the biggest decrease, at 36 percent. Small businesses were down 3.5 percent, while large businesses improved by 10.7 percent.

Singh noted that supply chain risk comes from three core areas:

Rising freight rates. Since mid-2024, freight rates for shipping routes between mainland China, the U.S. East and West Coasts and Europe have been up 15 percent to 22 percent, he said.

Payment delays. Less than 30 percent of U.S. businesses are optimistic about their day sales outstanding, according to the survey. Day sales outstanding is a metric that matches how long it takes a company to collect payment from the customer after the sale.

Conflict across the globe. “Data indicates that the number of conflicts per million people towards the end of 2024 was almost three times the level seen during the start of 2021,” Singh said.

If these developments gain further momentum, they likely will result in increased inflation and rising production costs, particularly for those businesses that heavily rely on imports, he said. “This, in turn, could prolong elevated interest rates, squeeze profit margins and dampen consumer demand, creating a cycle of what we call economic slowdown,” he said.

Making Data Meaningful

The interconnectedness of the global economy will likely continue to grow, causing more supply chain disruption.

But many businesses lack supply chain visibility and transparency, said Robert Kirk, head of analytics for global product at Dun & Bradstreet. Due to having a variety of systems and platforms, they struggle to interpret data and develop the right insights, meaning they often are responding to a challenge rather than being prepared for it, he said.

Other challenges include a continually changing supply chain environment, which calls for repeated scenario planning to (1) anticipate the impact of such changes on operations and (2) determine the best opportunities, he said.

(Photo credit: Getty Images/Kosal Hor)