Download - Economic Conditions Snapshot September 2015
Executives are more downbeat about the state of the global economy now than at any time this year,
according to McKinsey’s latest survey on economic conditions.1 Recent turmoil in global markets has
fueled concern over the strength of respondents’ home economies—and of the world economy, too.
At the same time, executives cite volatile economic conditions and exchange rates as emerging threats to
both domestic and global growth in the short term.
A majority predict that oil prices will stay low in the next year, which could potentially spur future growth.
It’s unclear, though, how much a growth spurt from oil prices could offset the economic risks posed by
increased volatility. Executives in emerging markets are particularly concerned with volatility at home—
especially in China, where four-fifths of respondents say their economy has worsened in the past six
months. Across regions, the domestic and global economic outlook for the coming months is more tempered.
The same is true of expectations for China’s economy, which most respondents believe will meet (or come
close to) the Chinese government’s 2015 growth target of 7 percent.2
Executives’ views deteriorate amid rising concerns over volatility and expectations for only modest growth in China.
McKinsey Global Survey results
Jean-François Martin
Economic Conditions Snapshot, September 2015
2
Volatility on the riseAs a risk to short-term domestic growth, volatility is cited more often now than in previous surveys. At
home, volatile economic conditions and exchange rates are greater worries for emerging-market
executives, especially in China (Exhibit 1). Forty-nine percent of executives there cite overall economic
volatility as a risk to domestic growth in the next year, compared with 27 percent of other respondents.
Exhibit 1
Survey 2015Economic snapshot, September 2015Exhibit 1 of 6
Increasing volatility is a heightened concern among emerging-market executives—especially those in China.
1 Out of 12 risks that were presented as answer choices.
% of respondents, by office location
Low consumer demand
Increased economic volatility
Increased volatility of exchange rates
Insufficient government-policy support
New asset bubbles
Potential risks to domestic economic growth,1 next 12 months
China, n = 91
All other regions,n = 1,797
49
52
38
31
18
27
34
16
21
32
33
Volatility has also climbed as a threat to global growth in the near term. Forty-eight percent of all
respondents now cite economic volatility as a top risk for the next 12 months, up from 34 percent in June;
32 percent now cite exchange-rate volatility, up from 22 percent. Volatile exchange rates are a much
greater concern for emerging-market executives, who report that since June, geopolitical instability has
fallen as a risk to global growth (Exhibit 2).
When asked about scenarios for growth over the next decade, the largest shares of executives believe that
“global downshift” (low but resilient global growth) and “pockets of growth” (uneven, volatile, but high
levels of global growth) are likeliest to occur. Compared with the previous survey, though, executives are
more likely to identify “rolling regional crises” (volatile and weak global growth): 25 percent now say
it’s the most likely, up from 17 percent in June.
On the exchange-rate front, many executives expect the US dollar will outperform all other currencies in
the next six months. Three-quarters of executives in China and in Latin America3 believe that their
currencies will depreciate against the dollar, and 60 percent of those in the United States say the dollar
will appreciate against the renminbi. A slightly larger share of respondents in the United States
(64 percent) expect the dollar to grow in value against the euro—though just one-third of eurozone
respondents say the same.
Exhibit 2
Survey 2015Economic snapshot, September 2015Exhibit 2 of 6
For emerging-market executives, volatility and low demand have risen as risks to global growth, while geopolitical issues have fallen.
1 Out of 12 risks that were presented as answer choices.
% of respondents working in emerging markets
Potential risks to global economic growth,1 next 12 months
March 2015,n = 654
June 2015,n = 471
Sept 2015,n = 550
Geopolitical instability 72 67 46
Increased economic volatility 42 37 48
Increased volatility of exchange rates
27 26 44
Low consumer demand 26 27 41
New asset bubbles 18 19 20
4
Exhibit 3
Survey 2015Economic snapshot, September 2015Exhibit 3 of 6
Compared with June, executives are roughly three times more likely now to say that global economic conditions have worsened.
1 Figures may not sum to 100%, because of rounding.
% of respondents1
Current conditions, compared with 6 months ago Expected conditions, in 6 months
Global economic conditions
Substantially better Moderately better The same Moderately worse Substantially worse
Sept 2015,n = 1,888
17 20 53 9 26 35 34 4
June 2015,n = 1,452
36 42 20 40 41 17
Mar 2015,n = 2,283
34 40 23 40 40 17
1
1 1
1
11 22
2
Widespread economic worryIn the past four surveys, executives consistently reported modest views of the global economy; they were
most likely to say that current conditions had held steady. But now, respondents in all regions are most
likely to say that the global economy is worse than it was six months ago. Sixty-two percent say economic
conditions have worsened (Exhibit 3)—nearly three times the share that did so in June, making this
the gloomiest respondents have been about the global economy in the short term since June 2012.4 On
average, respondents most often expect conditions to worsen in the coming months as well.
Executives in some regions are more optimistic than others about the global economy’s short-term
prospects. For example, in India, 44 percent expect improved global conditions; 28 percent expect condi-
tions will worsen, compared with roughly half of their peers in Latin America, China, and developed
Asia.5 Still, respondents in India are more than twice as likely now as in June to expect worse conditions.
And overall, emerging-market executives are much gloomier than their peers elsewhere: 76 percent
say the world economy has worsened in the past six months, compared with 56 percent of executives in
developed markets.
5
At the country level, respondents are more downbeat about short-term economic conditions than they’ve
been all year, and concerns are particularly acute in Asia and Latin America (Exhibit 4). In March,
40 percent of executives in China believed that domestic economic conditions would be worse by now. But
in this latest survey, fully 80 percent say conditions have worsened since March.
Executives in China are slightly more optimistic about the future than the present—though they are still
likelier than many other respondents (except those in Latin America) to believe domestic conditions
will worsen in the next six months. Their peers in developed Asia are equally apprehensive: 40 percent
expect worse conditions in the coming months, up from 23 percent in June and 16 percent in March.
This outlook for sluggish growth comes amid ever-lower expectations for oil prices in the next year.
Three months ago, the largest share of executives (45 percent) predicted that oil prices would
be $60 to $80 a barrel. Now the largest share (70 percent) expect that oil will cost between $40 and
$60 a barrel.
Modest prospects for China’s growthGiven the most recent responses from China, it’s not surprising that when asked specifically about the
country’s economy, many executives report a cautious outlook. Forty-nine percent of all respondents
believe that, in the year ahead, a sharp slowdown in China’s economic growth is very or extremely likely to
shock the global economy, up from 23 percent in the previous survey.
Executives in China are more optimistic about the future of their home economy than the present. But for the months ahead, they are still likelier than many other respondents to expect economic conditions at home will worsen.
6
Exhibit 4
Survey 2015Economic snapshot, September 2015Exhibit 4 of 6
Across regions, respondents in China and Latin America are the most downbeat about economic conditions at home.
1 Figures may not sum to 100%, because of rounding. 2 In India, n = 182; in Europe, n = 794; in North America, n = 562; in Asia–Pacific, n = 273; in developing markets, n = 213; in China,
n = 97; and in Latin America, n = 162. 3 In India, n = 154; in Europe, n = 644; in North America, n = 508; in Asia–Pacific, n = 186; in developing markets, n = 189; in China,
n = 91; and in Latin America, n = 116.
% of respondents,1 by office location
Expected conditions, in 6 months (Mar 2015)2
Current conditions, compared with 6 months ago (Sept 2015)3
Domestic economic conditions
Better The same Worse
India 93 7
1
49 2131
Europe 51 2029 48 2230
North America 56 1132 41 2238
Asia–Pacific 64 1621 24 5126
Developing markets
40 2138 20 5921
China 26 4034 9 8011
Latin America 19 5823 5 914
7
Exhibit 5
Survey 2015Economic snapshot, September 2015Exhibit 5 of 6
Executives in North America and Europe are the most likely to expect that GDP growth in China will slow this year.
1 Respondents who answered “don’t know” are not shown, so figures may not sum to 100%.
% of respondents,1 by office location
Expected rate of GDP growth in China, 2015
<4% 4%–5% 6%–7% ≥8%
North America, n = 508
3414 47
1
Europe, n = 644
339 53
1
India, n = 154
183 76
1
Developing markets, n = 189
249 64 2
Asia–Pacific, n = 186
272 70
China, n = 91
132 84
Latin America, n = 116
224 74
We also asked about the expected rate of GDP growth in China, and most respondents predict that
the country will meet or come close to its 2015 growth target of 7 percent. Executives in some regions—
Europe and North America, specifically—are more likely than others to expect modest (and slowing)
Chinese growth (Exhibit 5). Looking further ahead, to 2018, respondents are less optimistic. Nearly two-
thirds of all respondents (and 59 percent in China) believe that three years from now, the annual rate
of growth will be 5 percent or less.
8
Exhibit 6
Survey 2015Economic snapshot, September 2015Exhibit 6 of 6
Executives in China are less concerned than all others about a sharp slowdown there, both in the next year and the next decade.
1 Respondents who answered “don’t know” are not shown, so figures may not sum to 100%.
% of respondents,1 by office location
Likelihood of sharp slowdown in China’s economic growth
Over the next 12 months
26 257 41 37 713 41
29 2311 37 39 914 36Over the next 10 years
China, n = 91
All other regions,n = 1,797
Extremely likely Very likely Somewhat likely Not at all likely
Compared with their peers, executives in China are less worried about slowing growth. Just one-third say
a sharp slowdown in Chinese growth is very or extremely likely over the next year, and 40 percent say
the same about the next decade (Exhibit 6). Those in China are also more optimistic than others about the
rate of GDP growth: 84 percent say the economy will grow 6 to 7 percent this year. Just 15 percent—
compared with 39 percent of all other respondents—say the growth rate will be 5 percent or less.
At the same time, executives in China note concerns at the company level. They are more concerned than
their peers elsewhere that demand for their companies’ products and services will decrease in the next
six months. And along with executives in Latin America, they are the most likely to expect their companies’
profits will decrease.
1 The online survey was in the field from August 31 to September 4, 2015, and garnered responses from 1,888 executives representing the full range of regions, industries, company sizes, functional specialties, and tenures. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.
2 On March 5, 2015, at an annual parliamentary meeting, China Premier Li Keqiang announced a 7-percent target for 2015 GDP growth in China.
3 Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Peru, Uruguay, and Venezuela.4 “Economic Conditions Snapshot, June 2012: McKinsey Global Survey results,” June 2012, mckinsey.com.5 Australia, Hong Kong, Japan, New Zealand, the Philippines, Singapore, South Korea, and Taiwan.
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