mckinsey - economic conditions snapshot - june 2013 global survey results

Geopolitical instability tops the list of risks to global growth, as executives’ outlook for the

world economy—which had been increasingly positive since June 2012—plateaus.

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

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 growth—and that a sharp

slowdown in China’s 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

Economic Conditions Snapshot, June 2013

McKinsey Global Survey results

1 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 respondent’s

nation to global GDP to adjust

for differences in response rates.

Jean-François Martin

2 Economic Conditions Snapshot, June 2013McKinsey Global Survey results

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

% of respondents1

1 Figures may not sum to 100%, because of rounding.

Current conditions in global economy compared with 6 months ago

June 2013,n = 2,224

43 36 17Mar 2013,n = 1,367

36 39 22

29 40 26 4Dec 2012,n = 1,575

Sept 2012,n = 2,058

25 34 36 4

Substantially better

Moderately better

The same Moderately worse

Substantially worse

1

2

1

1

2

1

Exhibit 1

Steadying global conditions

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.

2 See “Economic Conditions

Snapshot, March 2013:

McKinsey Global Survey

results,” March 2013,

mckinsey.com.


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

% of respondents,1 by office location

1 Figures may not sum to 100%, because of rounding.2Includes China and Latin America.

Expected conditions in global economy, in 6 months

38 35 27Asia-Pacific,n = 145

Total, n = 2,224

41 40 19

42 37 21Developing markets,2

n = 336

32 50 19North America,n = 654

Eurozone,n = 437

49 37 15

India,n = 178

48 35 16

Better The same Worse

Exhibit 2

A wary outlook from North America


Survey 2013Economic conditions survey June 2013 Exhibit 3 of 6Exhibit title: Worries over instability and volatility

% of respondents

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

Top 5 risks1 to global economic growth, next 12 months

June 2013, n = 2,224

Mar 2013, n = 1,367

Dec 2012, n = 1,575

Sept 2012, n = 2,058

Geopolitical instability Low consumer demand

Increased economic volatility

5130

3945

Sovereign-debt defaults

3631

4139

2944

5046

New asset bubbles

2117

1212

3826

3030

Exhibit 3

Worries over instability and volatility

The skeptical view from North America may arise in part from concern over new global

threats—namely, 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,

such as a lack of policy support and domestic political conflicts.


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

% of respondents1

Mar 2013 June 2013

1 Figures may not sum to 100%, because of rounding.2Includes “growth” and “minimal growth,” which were presented as separate answer choices in the question.

Expected state of eurozone economy, in 6 months

Eurozone

Total

Growth2

Minimal contraction

Recession

Depression

Don’t know

27 33

38

24

44

23

24

40

37

21

50

23

25 3

2 2

2

1 0

Exhibit 4

Potential for eurozone growth

Debt concerns aside, one-third of respondents expect the eurozone’s 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 China’s growth—not surprising, given

the reports of contracting manufacturing activity and slowing export growth released around

the time of the survey’s launch.3 A larger share than in March also expects to see geopolitical

instability in Asia over the next 12 months.

3 See Keith Bradsher and Gerry

Mullany, “China’s 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 China’s growth is

at least somewhat likely to

occur over the next 12 months;

in the March 2013 survey,

64 percent said the same.


At home, views diverge

While there is evidence that the global economy’s 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 improved—and will improve in six months—as 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

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.

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.


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

% of respondents,1 by office location June 2013

Mar 2013

Expected conditions in respondents’ countries, in 6 months

Asia-Pacific Eurozone North AmericaIndiaDeveloping markets2

Better42

3835

473234

4560

5443

The same30

4235

3041

3240

2538

33

Worse29

1929

2327

331515

824


Exhibit 6

. . . amid cautious emerging-market views

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

% of respondents,1 by office location June 2013

Mar 2013

Current conditions in respondents’ countries compared with 6 months ago

Asia-Pacific Eurozone North AmericaIndiaDeveloping markets2

Better3742

2541

1824

2944

6247

The same26

3632

2840

2732

293233

Worse37

2143

3142

4939

276

20


Exhibit 5

Improving conditions in North America . . .


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.

What’s 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,

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.

Copyright © 2013 McKinsey & Company. All rights reserved.

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.

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