McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

Geopolitical instability tops the list of risks to global growth, as executives outlook for the world economywhich had been increasingly positive since June 2012plateaus. Executives in North America report positive economic momentum at home while those in the developing world are less upbeat about their countries prospects. These are among the key findings from our most recent survey on economic conditions,1 in which respondents from North America are most likely to report improved country-level conditions, to expect that conditions will be better still in six months, and to believe that jobless rates will fall. At the same time, respondents in North America have a warier view of the global economy than their peers elsewhere, resulting in a fragmented outlook and tempered optimism about the world economy as a whole. On average, executives are still more positive than negative
1 

about current and future global conditions. But growing shares of respondents say that over the next year, geopolitical instability will pose a threat to global growthand that a sharp slowdown in Chinas growth is likely to occur. Global uncertainty After three surveys in which executives were increasingly bullish about current and future conditions in the world economy, this optimism has stabilized. Thirty-seven percent of respondents say current conditions are better now than they were six months ago, down

The online survey was in the field from June 3 to June 7 and garnered responses from 2,224 executives representing the full range of regions, industries, company sizes, titles, and functional specialties. The data are weighted by the contribution of each respondents nation to global GDP to adjust for differences in response rates.

Jean-Franois Martin

McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

Survey 2013 Economic conditions survey June 2013 Exhibit 1 of 6 Exhibit title: Steadying global conditions
Exhibit 1

Steadying global conditions

% of respondents1
Substantially better Moderately better The same Moderately worse Substantially worse

Current conditions in global economy compared with 6 months ago June 2013, n = 2,224 Mar 2013, n = 1,367 Dec 2012, n = 1,575 Sept 2012, n = 2,058
1 Figures

1 36 2 43 1 29 1 25 34 36 40 26 36 17 39 22

may not sum to 100%, because of rounding.

2 

See Economic Conditions Snapshot, March 2013: McKinsey Global Survey results, March 2013, mckinsey.com.

from 45 percent in March,2 while a slightly larger share says conditions have stayed the same (Exhibit 1). Looking ahead, 41 percent expect conditions will improve in six months time (Exhibit 2). In North America, respondents are more positive than all others about their own countries prospects yet have the least optimistic outlook for the global economy.

McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

Survey 2013 Economic conditions survey June 2013 Exhibit 2 of 6 Exhibit title: A wary outlook from North America
Exhibit 2

A wary outlook from North America

% of respondents,1 by ofce location
Better The same Worse

Expected conditions in global economy, in 6 months Total, n = 2,224 Asia-Pacic, n = 145 Developing markets,2 n = 336 Eurozone, n = 437 India, n = 178 North America, n = 654 41 40 19

38

35

27

42

37

21

49

37

15

48

35

16

32

50

19

1 Figures

2Includes

may not sum to 100%, because of rounding. China and Latin America.

McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

The skeptical view from North America may arise in part from concern over new global threatsnamely, geopolitical instability. Among executives in the region, 62 percent cite this as a risk to growth in the world economy, up from just 38 percent in the previous survey. Geopolitical instability is a global worry, too: the largest share of all respondents now cites it as a potential risk to worldwide economic growth (Exhibit 3). Increased economic volatility and sovereign-debt defaults follow as high-ranking threats. Meanwhile, low consumer demand has become a less pressing issue since March, as have concerns related to government,

Survey such as a 2013 lack of policy support and domestic political conflicts. Economic conditions survey June 2013 Exhibit 3 of 6 Exhibit title: Worries over instability and volatility
Exhibit 3

Worries over instability and volatility

% of respondents
June 2013, n = 2,224 Mar 2013, n = 1,367 Dec 2012, n = 1,575 Sept 2012, n = 2,058

Top 5

risks1

to global economic growth, next 12 months 51 29 Low consumer demand 45 38 21 17 12 12 44 50 46

Geopolitical instability

30 39

Increased economic volatility

26 30 30 36 31 41 39

New asset bubbles

Sovereign-debt defaults

1 Out

of 12 risks that were presented as answer choices in the question.

McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

Survey 2013 Economic conditions survey June 2013 Exhibit 4 of 6 Exhibit title: Potential for eurozone growth
Exhibit 4

Potential for eurozone growth

% of respondents1 Expected state of eurozone economy, in 6 months Mar 2013 2 5 23 Total 27 24 June 2013 2 3 33
Growth2 Minimal contraction Recession Depression Dont know

44 21 23 Eurozone 37 24 21

38 2 0

40

50

1 Figures

2Includes

may not sum to 100%, because of rounding. growth and minimal growth, which were presented as separate answer choices in the question.

3 

See Keith Bradsher and Gerry Mullany, Chinas export growth slows amid concern of slowdown, New York Times, June 8, 2013, and Richard Silk, Factory activity contracts, Wall Street Journal, May 22, 2013. In this survey, 72 percent of respondents say a sharp slowdown in Chinas growth is at least somewhat likely to occur over the next 12 months; in the March 2013 survey, 64 percent said the same.

Debt concerns aside, one-third of respondents expect the eurozones economy to grow over the next six months, and an even larger share of executives in the region now say the same (Exhibit 4). Meanwhile, increased shares of respondents suggest that Asia will be a source of global economic uncertainty over the next year. Compared with three months ago, executives are now more likely to expect a sharp slowdown in Chinas growthnot surprising, given the reports of contracting manufacturing activity and slowing export growth released around the time of the surveys launch.3 A larger share than in March also expects to see geopolitical instability in Asia over the next 12 months.

McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

At home, views diverge While there is evidence that the global economys recovery is under way,4 the responses indicate that slackening growth and pessimism in some parts of the world are offsetting the progress (and relative optimism) in others. On average, the same shares of executives say conditions in their home economies have improvedand will improve in six monthsas did in March. But as in previous surveys, opinions continue to differ greatly by geography (Exhibits 5 and 6). Across regions, executives in North America are the most positive about current and future conditions at home; they are also much more upbeat than they were
4 

See Melissa Eddy, Global economy is rebounding, OECD says, New York Times, May 29, 2013. 5  Includes China and Latin America. 6  The region includes respondents working in Australia, Hong Kong, Japan, New Zealand, the Philippines, Singapore, South Korea, and Taiwan. On average, 24 percent of executives cite increased economic volatility as one of the biggest potential risks to economic growth in their countries over the next year (up from 20 percent who said so in March). In developed Asia, 33 percent of executives cite increased volatility, which is the largest share across geographies.

three months ago. The opposite is true in developing markets,5 where 43 percent say current conditions are worse than six months ago (up from 31 percent in March). Additionally, just 35 percent say things will be better in six months time, down from 47 percent three months ago. After months of reporting positive expectations, these executives are now just as likely to expect conditions at home will stay the same as they are to expect improvements. In the eurozone, the largest share of respondents says conditions will stay the same. Across geographies, the risks most often identified as threats to domestic growth are the same ones selected in March: low consumer demand, a lack of government-policy support, and political conflicts. A slightly larger share of respondents now also cites increased economic volatility, which is of particular concern among executives in developed Asia.6 The top-ranked risk to country-level growth over the next ten years is low levels of innovation.

McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

Survey 2013 Economic conditions survey June 2013 Exhibit 5 of 6 Exhibit title: Improving conditions in North America . . .
Exhibit 5

Improving conditions in North America . . .

% of respondents,1 by ofce location
June 2013 Mar 2013

Current conditions in respondents countries compared with 6 months ago Asia-Pacic Developing markets2 25 41 32 28 43 31 Eurozone India North America

Better

37 42 26 36 37 21

18 24 40 27 42 49

29 44 32 29 39 27 6 20 32 33 47

62

The same

Worse

1 Figures

2Includes

Survey 2013 China and Latin America. Economic conditions survey June 2013 Exhibit 6 of 6 Exhibit title: . . . amid cautious emerging-market views

may not sum to 100%, because of rounding.

Exhibit 6

. . . amid cautious emerging-market views

% of respondents,1 by ofce location
June 2013 Mar 2013

Expected conditions in respondents countries, in 6 months Asia-Pacic Developing markets2 35 47 35 30 29 23 Eurozone India North America

Better

42 38 30 42 29 19

32 34 41 32 27 33

45 60 40 25 15 15 8 24

54 43 38 33

The same

Worse

1 Figures

2Includes

may not sum to 100%, because of rounding. China and Latin America.

McKinsey Global Survey results

Economic Conditions Snapshot, June 2013

More upbeat news in North America Beyond their growing confidence about conditions at home, respondents in North America note some other positive indicators of their countries economic prospects. These executives are twice as likely as the total average (40 percent, compared with 20 percent) to expect their countries unemployment rates will decrease over the next six months, even though the jobless rate in the United States edged up slightly in May.7 At the company level, larger shares of respondents in the region now expect that customer demand for their products and services will increase and that their workforces will grow. Whats more, respondents are becoming more optimistic about the longer-term effect of recent government-spending cuts and tax increases on the United States economy. In this survey,
7 

In the US Bureau of Labor Statistics Employment Situation report for May 2013, released on June 7, the unemployment rate was 7.6 percent, up slightly from the 7.5 percent reported for April (released on May 3); see bls.gov.

31 percent of all respondents expect a positive impact on growth over the next three years, up from 21 percent in March and 17 percent in December. Respondents in North America are still more negative than all others, with just 21 percent predicting a positive effect from these measures. Nonetheless, their expectations are slightly more upbeat now than three months ago, when just 17 percent said the same.

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