mc kinsey - economic conditions snapshot, march 2013
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Mc Kinsey - Economic Conditions Snapshot, March 2013TRANSCRIPT
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 growth
over the next year, according to executives. For the first time, though, we asked about
political conflicts as a potential threat to growth—and this issue is not far behind. Political
conflicts are now the second most cited risk to domestic growth (38 percent of all
respondents say so), followed by insufficient support from government policy (cited by
37 percent of respondents).
Compared with the previous two surveys, respondents across regions (including the eurozone)
express notably more positive views on current conditions in their own countries and the
global economy, while their outlook for the next six months is still more optimistic than not.
Looking at the next decade, executives also cite political conflicts most often as a risk to
their countries’ growth, though responses vary by region.
Economic Conditions Snapshot, March 2013
McKinsey Global Survey results
1 The online survey was in the field from March 4 to March 8, 2013, and generated responses from 1,367 executives representing the full range of regions, indus- tries, company sizes, tenures, and functional specialties. This was the week before automatic cuts to government spending went into the effect in the United States, and the week after an inconclusive general election in Italy. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.
Jean-François Martin
2 Economic Conditions Snapshot, March 2013McKinsey Global Survey results
Survey 2013Economic conditions survey March 2013 Exhibit 1 of 6Exhibit title: Country-level conditions improve
% of respondents, by office location
Current and expected economic conditions in respondents’ countries
1 Includes China and Latin America.
Mar 2013
Dec 2012
Sept 2012
June 2012
Asia-Pacific
Eurozone North America
IndiaDeveloping markets1
Conditions are better than 6 months ago
Conditions will be better in 6 months
4215
2821
4135
3023
241518
11
443740
3
4746
2933
3853
3019
Total
383026
21
414139
30
4749
4338
3423
3218
605556
28
434546
36
Exhibit 1
Country-level conditions improve
Perceived improvements—and political concerns—at home
The shares of executives reporting that current economic conditions in their countries are better
now than six months ago have risen since December, while their largely positive outlook
on future conditions held steady (Exhibit 1). Those in developed Asia2 are particularly positive:
the share of respondents there who report improved conditions has nearly tripled since
the previous survey. And though the views of executives in the eurozone are still the gloomiest
across regions, roughly one-quarter say conditions at home are better, up from 15 percent
three months ago. Respondents in India maintain the most positive outlook on future conditions,
while those in the eurozone remain the most cautious—or at least uncertain. Executives in
the eurozone are almost equally split in expecting conditions will be better, the same, or worse
in six months.3
2 Australia, Hong Kong, Japan, New Zealand, the Philippines, Singapore, South Korea, and Taiwan.
3 In the most recent survey, 34 percent of executives in the eurozone say economic conditions in their coun- tries will be better in the next six months, 32 percent say conditions will stay the same, and 32 percent say they will worsen.
3 Economic Conditions Snapshot, March 2013McKinsey Global Survey results
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
most often as a threat to domestic growth over the next year—and most often overall by
those in North America (Exhibit 2). Executives also express growing concern about a lack of
government policies that support economic and business activity.4 These responses vary
across regions, with executives in North America and India most likely to cite political conflicts
and insufficient policy support. Forty percent in India also cite transitions of political leader-
ship as a risk, compared with 18 percent of the global average.
Among perceived risks to global growth, political conflicts rank fourth overall, but
respondents in North America are more likely than their peers in other regions to cite it. This is
not surprising, given that a majority of all executives (58 percent) say pending cuts to
Survey 2013Economic conditions survey March 2013 Exhibit 2 of 6Exhibit title: Political tensions pose risks to growth
% of respondents, by office location
Top risks to domestic economic growth, next 12 months
1 Includes China and Latin America.
Asia-Pacific, n = 145
Total,n = 1,367
Eurozone, n = 247
North America, n = 402
India, n = 131
Developing markets,1 n = 232
Low consumer demand
42 45 28 61 14 39
Domestic political conflicts
38 25 32 34 40 58
Inflation
37 30 35 36 53 40Insufficient government-policy support
27 21 19 45 13 20Lack of access to credit
20 17 38 6 57 13
Exhibit 2
Political tensions pose risks to growth
4 In this survey, 37 percent of all respondents cited “insufficient government-policy support” as a potential threat to growth, compared with 28 percent who said so in December 2012. Across regions, the biggest percentage-point jumps in the shares citing a lack of support are in India (53 percent, up from 36 percent in December), developing markets (35 percent, up from 22 percent), and North America (40 percent, up from 28 percent).
4 Economic Conditions Snapshot, March 2013McKinsey Global Survey results
Survey 2013Economic conditions survey March 2013 Exhibit 3 of 6Exhibit title: Optimism extends to global economy
% of respondents1
1 Figures may not sum to 100%, because of rounding.
Current conditions in global economy compared with 6 months ago
Expected conditions in global economy, in 6 months
2Mar 2013,n = 1,367
43 36 17 44 35 16
1
Dec 2012,n = 1,575
29 40 26 4 41 32 22 3
Sept 2012,n = 2,058
25 34 36 4 35 34 24 4
June 2012,n = 1,349
9 24 58 8 19 32 42 6
2
2
3
3
1
1
1
1
Substantially better
Moderately better
The same Moderately worse
Substantially worse
Exhibit 3
Optimism extends to global economy
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.
Continued optimism amid uncertainty
Compared with three months ago, respondents have a more positive view of current global
conditions as well: 45 percent say conditions in the world economy have improved, up
from 30 percent who said so in December, and nearly half expect conditions will be better in six
months (Exhibit 3). Across regions, respondents in developed Asia are now the most positive
about current global conditions, although they were among the most negative throughout 2012.
In December, 22 percent of respondents in the region said global conditions had improved;
now 57 percent say the same.
5 On March 1, 2013, the Friday before the survey entered the field, a set of automatic cuts to government spending in the United States (also known as “sequestration” or “the sequester”) went into effect. In the weeks leading up to the sequester, US political leaders failed to negotiate a deficit-reduction agreement that would have supplanted the sched- uled cuts.
5 Economic Conditions Snapshot, March 2013McKinsey Global Survey results
Survey 2013Economic conditions survey March 2013 Exhibit 4 of 6Exhibit title: Eurozone concerns continue to wane
% of respondents,1 by office location
Likelihood of potential shocks to global economy, next 12 months
Eurozone respondents
All others Eurozone respondents
All others
1 Respondents who answered “not at all likely” or “don’t know” are not shown.
Exit of 1 or more countries from eurozone
End of euro as single European currency
Mar 2013 5 37 43
Dec 2012 6 40 48
Sept 2012 12 42 57
1
2
3
13 16
9 11
13 17
17 22
23 28
24 29
12 44 59
17 45 65
175 51 73
3
3 11 41
Extremely likely Very likely Somewhat likely
21 41
31 41
Exhibit 4
Eurozone concerns continue to wane
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
countries will exit the eurozone in the next year or that the euro will end as the single European
currency (Exhibit 4). Respondents in the eurozone express less concern than others that
either of these economic shocks will come to bear; they are also less likely than in the previous
two surveys to expect an increase in their inflation rate.6
And while sovereign-debt defaults remain the second most-cited threat to global growth over the
next year, after demand, just 31 percent cite that risk now—down from 41 percent in December
6 In the eurozone, 30 percent of executives expect the inflation rate there will increase over the next six months, down from 46 percent who said so in December and 53 percent in September. By contrast, half of all global respondents expect the inflation rates in their home economies to increase.
6 Economic Conditions Snapshot, March 2013McKinsey Global Survey results
(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
developed Asia, demand is the most frequently cited risk, while the share of executives there
citing the loss of business activity to lower-cost countries has plummeted to 33 percent
Survey 2013Economic conditions survey March 2013 Exhibit 5 of 6Exhibit title: The threat of debt declines
% of respondents
Sovereign-debt default(s) cited as risk to global and domestic economic growth, next 12 months
Total Eurozone
Mar 2013
Dec 2012
Sept 2012
June 2012
Growth in global economy
Growth in respondents’ countries
223535
54
3141
3959
81112
34
132022
50
Exhibit 5
The threat of debt declines
7 See European Commission, “Eurostat,” ec.europa.eu/eurostat.
7 Economic Conditions Snapshot, March 2013McKinsey Global Survey results
Survey 2013Economic conditions survey March 2013 Exhibit 6 of 6Exhibit title: Emerging-market strength still expected
% of respondents1 who ranked scenario as most likely economic outcome over next 10 years
Dec 2012, n = 1,565Mar 2013, n = 1,367
Global growth renewedDeveloped economies spur innovations that restore growth; emerging economies rely more on domestic demand; economic shocks, resource volatility are smaller-scale threats
Advanced economies reboundDeveloped economies steadily resolve debt and labor issues that drag on productivity; emerging markets cannot sustain growth and face persistent crises
Emerging markets leadDeveloped economies face debt and labor challenges; emerging markets sustain growth through transition to domestic-led economies and are resilient through crises
Global lost decadeDeveloped and emerging markets do not resolve structural challenges, resulting in slowing growth; the world experiences multiple economic and financial shocks
New “Chimerican” decadeUnited States and China drive global growth; Eurozone remains fragile and imbalances persist in emerging markets
The leveling decadeEmerging markets endure future crises as China struggles to drive domestic demand; United States and Europe struggle with slow recovery, long-term debt
15 21
12 18
32 43
12 19
9
19
New scenarios for 2013–23
1 Figures may not sum to 100%, because of rounding.
Exhibit 6
Emerging-market strength still expected
8 Economic Conditions Snapshot, March 2013McKinsey Global Survey results
(down from 60 percent in December). The top perceived risk in North America is domestic
political conflicts; in India, it is a lack of government-policy support; and in the eurozone,
it is low levels of innovation. In developing markets, equal shares cite political tensions and
innovation most often.
When asked about potential shocks to the global economy, the largest share of executives
say instability in the Middle East and North Africa is extremely or very likely in the next ten
years (63 percent), just ahead of volatile oil prices (61 percent). We asked about instability
in Asia for the first time, and the share of executives that say this economic shock is likely to
occur over the next decade (30 percent) is much larger than the share expecting it in
the year ahead (12 percent).
In addition to the four scenarios for global economic outcomes that we asked about in 2012, we
introduced two new scenarios in this survey. As was the case throughout last year, the largest
share of executives still select one of the four earlier outcomes—emerging-market leadership and
the transition of these markets to domestic-led economies, or “emerging markets lead”—as
being most likely over the next decade (Exhibit 6). But the second-largest share rank the new
“leveling decade” scenario first, in which emerging markets are resilient through future
crises as China struggles to drive domestic demand, and Europe and the United States struggle
with slow recovery and long-term debt. Executives in developed markets are likelier than
their counterparts in the emerging markets to select this new scenario.
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