Mc Kinsey - Economic Conditions Snapshot, March 2013
McKinsey Global Survey resultsEconomic Conditions Snapshot,March 2013 Executives report better conditions at home and in the global economy, but they also expect political and governmental issues to pose risks to growth. Growing shares of executives say their countries’ economies have improved, but domestic political conflicts weigh heavily as potential threats to growth, according to our latest survey on economic conditions.1 This is especially true in the United States, where negotiations failed to avert the automatic government-spending cuts that went into effect the week before the survey was conducted. Low consumer demand remains the most frequently cited risk to domestic and global growth1 The online survey was in the field over the next year, according to executives. For the first time, though, we asked about from March 4 to March 8, 2013, and generated responses from political conflicts as a potential threat to growth—and this issue is not far behind. Political 1,367 executives representing the full range of regions, indus- conflicts are now the second most cited risk to domestic growth (38 percent of all tries, company sizes, tenures, and respondents say so), followed by insufficient support from government policy (cited by functional specialties. This was the week before automatic 37 percent of respondents). cuts to government spending went into the effect in the United States, and the week after Compared with the previous two surveys, respondents across regions (including the eurozone) an inconclusive general election express notably more positive views on current conditions in their own countries and the in Italy. To adjust for differences in response rates, the data global economy, while their outlook for the next six months is still more optimistic than not. are weighted by the contribution Looking at the next decade, executives also cite political conflicts most often as a risk to of each respondent’s nation to global GDP. their countries’ growth, though responses vary by region. Jean-François Martin
2 McKinsey Global Survey results Economic Conditions Snapshot, March 2013 Perceived improvements—and political concerns—at home The shares of executives reporting that current economic conditions in their countries are better 2 Australia, Hong Kong, now than six months ago have risen since December, while their largely positive outlook Japan, New Zealand, on future conditions held steady (Exhibit 1). Those in developed Asia2 are particularly positive: the Philippines, Singapore, South Korea, and Taiwan. the share of respondents there who report improved conditions has nearly tripled since 3 In the most recent survey, 34 the previous survey. And though the views of executives in the eurozone are still the gloomiest percent of executives in the eurozone say economic across regions, roughly one-quarter say conditions at home are better, up from 15 percent conditions in their coun- three months ago. Respondents in India maintain the most positive outlook on future conditions, tries will be better in the next six months, 32 percent say while those in the eurozone remain the most cautious—or at least uncertain. Executives in conditions will stay the same, the eurozone are almost equally split in expecting conditions will be better, the same, or worse and 32 percent say they will worsen. Survey 2013 in six months.3 Economic conditions survey March 2013 Exhibit 1 of 6 Exhibit title: Country-level conditions improve Exhibit 1 Country-level conditions improve % of respondents, by ofﬁce location Mar 2013 Dec 2012 Sept 2012 June 2012 Current and expected economic conditions in respondents’ countries Total Asia- Developing Eurozone India North Paciﬁc markets1 America 38 42 41 24 44 47 Conditions are better 30 15 35 15 37 46 than 6 months ago 26 28 30 18 40 29 21 21 23 11 3 33 41 38 47 34 60 43 Conditions will be 41 53 49 23 55 45 better in 6 months 39 30 43 32 56 46 30 19 38 18 28 36 1 Includes China and Latin America.
3 McKinsey Global Survey results Economic Conditions Snapshot, March 2013 Survey 2013 Economic conditions survey March 2013 Exhibit 2 of 6 Exhibit title: Political tensions pose risks to growth Exhibit 2 Political tensions pose risks to growth % of respondents, by ofﬁce location Top risks to domestic economic growth, next 12 months Total, Asia-Paciﬁc, Developing Eurozone, India, North n = 1,367 n = 145 markets,1 n = 247 n = 131 America, n = 232 n = 402 Low consumer 42 45 28 61 14 39 demand Domestic political 38 25 32 34 40 58 conﬂicts Insufﬁcient government-policy 37 30 35 36 53 40 support Lack of access 27 21 19 45 13 20 to credit Inﬂation 20 17 38 6 57 13 1 Includes China and Latin America. Improving conditions aside, respondents often point to political and governmental forces as risks to growth in their home economies. After sluggish demand, political conflicts are cited 4 In this survey, 37 percent of all most often as a threat to domestic growth over the next year—and most often overall by respondents cited “insufficient government-policy support” those in North America (Exhibit 2). Executives also express growing concern about a lack of as a potential threat to growth, government policies that support economic and business activity.4 These responses vary compared with 28 percent who said so in December 2012. across regions, with executives in North America and India most likely to cite political conflicts Across regions, the biggest and insufficient policy support. Forty percent in India also cite transitions of political leader- percentage-point jumps in the shares citing a lack of support ship as a risk, compared with 18 percent of the global average. are in India (53 percent, up from 36 percent in December), developing markets (35 percent, Among perceived risks to global growth, political conflicts rank fourth overall, but up from 22 percent), and respondents in North America are more likely than their peers in other regions to cite it. This is North America (40 percent, up from 28 percent). not surprising, given that a majority of all executives (58 percent) say pending cuts to
4 McKinsey Global Survey results Economic Conditions Snapshot, March 2013 government spending in the United States will have a negative impact on growth there in the next three years5; a slightly larger share of those in the United States (63 percent) say so. 5 On March 1, 2013, the Friday before the survey entered Continued optimism amid uncertainty the field, a set of automatic cuts to government spending in Compared with three months ago, respondents have a more positive view of current global the United States (also known conditions as well: 45 percent say conditions in the world economy have improved, up as “sequestration” or “the sequester”) went into effect. In from 30 percent who said so in December, and nearly half expect conditions will be better in six the weeks leading up to the months (Exhibit 3). Across regions, respondents in developed Asia are now the most positive sequester, US political leaders failed to negotiate a deficit- about current global conditions, although they were among the most negative throughout 2012. reduction agreement that would In December, 22 percent of respondents in the region said global conditions had improved; have supplanted the sched- uled cuts. Survey 2013 now 57 percent say the same. Economic conditions survey March 2013 Exhibit 3 of 6 Exhibit title: Optimism extends to global economy Exhibit 3 Optimism extends to global economy % of respondents1 Substantially Moderately The same Moderately Substantially better better worse worse Current conditions in global economy Expected conditions in global compared with 6 months ago economy, in 6 months 2 2 3 1 Mar 2013, 43 36 17 44 35 16 n = 1,367 1 2 Dec 2012, 29 40 26 4 41 32 22 3 n = 1,575 1 3 Sept 2012, 25 34 36 4 35 34 24 4 n = 2,058 1 1 June 2012, 9 24 58 8 19 32 42 6 n = 1,349 1 Figures may not sum to 100%, because of rounding.
5 McKinsey Global Survey results Economic Conditions Snapshot, March 2013 Survey 2013 Economic conditions survey March 2013 Exhibit 4 of 6 Exhibit title: Eurozone concerns continue to wane Exhibit 4 Eurozone concerns continue to wane % of respondents,1 by ofﬁce location Extremely likely Very likely Somewhat likely Likelihood of potential shocks to global economy, next 12 months Exit of 1 or more countries End of euro as single from eurozone European currency Eurozone All others Eurozone All others respondents respondents 1 3 1 2 1 4 Mar 2013 5 37 43 12 44 59 13 16 17 22 2 3 1 1 1 4 Dec 2012 6 40 48 17 45 65 9 11 23 28 3 1 3 1 4 Sept 2012 12 42 57 5 17 51 73 13 17 24 29 1 Respondents who answered “not at all likely” or “don’t know” are not shown. The results also indicate that some global concerns about the eurozone have eased. Decreasing shares of executives inside and outside the region say it’s at least somewhat likely that 6 In the eurozone, 30 percent of executives expect the inflation countries will exit the eurozone in the next year or that the euro will end as the single European rate there will increase over currency (Exhibit 4). Respondents in the eurozone express less concern than others that the next six months, down from 46 percent who said so in either of these economic shocks will come to bear; they are also less likely than in the previous December and 53 percent in two surveys to expect an increase in their inflation rate.6 September. By contrast, half of all global respondents expect the inflation rates And while sovereign-debt defaults remain the second most-cited threat to global growth over the in their home economies to increase. next year, after demand, just 31 percent cite that risk now—down from 41 percent in December
6 McKinsey Global Survey results Economic Conditions Snapshot, March 2013 Survey 2013 Economic conditions survey March 2013 Exhibit 5 of 6 Exhibit title: The threat of debt declines Exhibit 5 The threat of debt declines % of respondents Mar 2013 Dec 2012 Sept 2012 Sovereign-debt default(s) cited as risk to global and June 2012 domestic economic growth, next 12 months Total Eurozone 31 22 Growth in global 41 35 economy 39 35 59 54 8 13 Growth in 11 20 respondents’ 12 22 countries 34 50 (Exhibit 5). As a threat to domestic growth, sovereign-debt defaults have reached a new low among all respondents and in the eurozone. In June 2012, about one-third of global executives (the second-largest share) and half of those in the eurozone cited sovereign-debt defaults as a risk to their countries’ growth; only 8 percent of all respondents and 13 percent in the eurozone say so now. Still, responses from the region highlight some persistent uncertainties. High unemploy- ment, which the European Commission most recently pegged at 10.8 percent,7 remains a concern. Although the share of executives in the eurozone expecting an increase in their countries’ unemployment rates is slightly smaller than in December, more than half expect unemployment to rise—compared with roughly one-third of all respondents who say the same about jobless- ness in their own countries. Since last June, more respondents in the eurozone than in all other regions continue to express concern that low demand will threaten country-level growth over the next year. The long-term outlook On risks to domestic growth in the decade ahead, respondents look to political conflicts most often, followed by low levels of innovation, government regulation, and access to talent. In 7 developed Asia, demand is the most frequently cited risk, while the share of executives there See European Commission, “Eurostat,” ec.europa.eu/eurostat. citing the loss of business activity to lower-cost countries has plummeted to 33 percent
7 McKinsey Global Survey results Economic Conditions Snapshot, March 2013 Survey 2013 Economic conditions survey March 2013 Exhibit 6 of 6 Exhibit title: Emerging-market strength still expected Exhibit 6 Emerging-market strength still expected % of respondents1 who ranked scenario as most likely economic outcome over next 10 years Mar 2013, n = 1,367 Dec 2012, n = 1,565 Global growth renewed Developed economies spur innovations that restore growth; emerging economies rely more on 15 21 domestic demand; economic shocks, resource volatility are smaller-scale threats Advanced economies rebound Developed economies steadily resolve debt and labor issues that drag on productivity; 12 18 emerging markets cannot sustain growth and face persistent crises Emerging markets lead Developed economies face debt and labor challenges; emerging markets sustain 32 43 growth through transition to domestic-led economies and are resilient through crises Global lost decade Developed and emerging markets do not resolve structural challenges, resulting in slowing 12 19 growth; the world experiences multiple economic and ﬁnancial shocks New “Chimerican” decade United States and China drive global growth; New scenarios 9 Eurozone remains fragile and imbalances persist in for 2013–23 emerging markets The leveling decade Emerging markets endure future crises as China struggles to drive domestic demand; United 19 States and Europe struggle with slow recovery, long-term debt 1 Figures may not sum to 100%, because of rounding.