Economic conditions outlooks, 2019

See how executives’ views on economic conditions and their companies’ prospects evolved throughout 2019.

Survey

Economic Conditions Snapshot, December 2019

Respondents’ views on the world economy and their countries’ conditions turn somewhat brighter. Trade tensions remain the most-cited threat to global growth, while social unrest climbs on the list of concerns.

The views of respondents to McKinsey’s latest survey on economic conditions end the year on a somewhat more upbeat note, moving away from earlier pessimism. 1 While executives still tend to report negative sentiments, a growing share of respondents see current and future global conditions as stable or improving.

Views on conditions at home are also more tempered overall in this latest survey, as a larger share of respondents say their economies are unchanged from—as opposed to worse than—six months ago. 2 In Latin America and in India, where executives are likeliest to report that present conditions have declined, respondents most clearly predict improvement in the months ahead.

Among perceived risks to global and domestic growth, trade conflicts and trade-policy changes remain at the fore, but social and political risks have risen on the list of commonly cited threats. Respondents identify social unrest as a global risk more often than they have all year, and they are more likely now than in the previous survey to say domestic political conflicts and transitions of political leadership are a top threat to their countries’ economies.

Though still cautious, views on the world economy grow more favorable

Views on the world economy remain more downbeat than cheerful overall. For the sixth quarter in a row, a larger share of respondents say the world economy has worsened than improved in the past six months. But the year’s negative trend has reversed: for the first time in 2019, respondents are more likely than in the previous survey to say conditions have stayed the same or improved, and are much less likely to say conditions have declined (Exhibit 1). Whereas three-quarters of respondents in September described conditions as having declined, that number fell to 53 percent in this latest survey, similar to the level one year ago.

Sentiments about current and future global conditions have stabilized.
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Expectations for the months ahead also have shifted in a positive direction. In a change from the two previous surveys, fewer than half of respondents expect global conditions to worsen in the next six months. They are more likely than respondents were three and six months ago to expect conditions to remain unchanged.

Similarly, when asked specifically about the rate of global growth, the share of respondents saying they expect contraction has decreased for the first time this year (Exhibit 2). Further, the share expecting an increase in the growth rate has nearly doubled since the previous survey.

For the first time this year, expectations for the global economy’s growth rate have turned more favorable.
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Shifting sentiment at home

Respondents’ views on current conditions in their countries also have moderated, though the share reporting improvement hasn’t grown. About four in ten say economic conditions have worsened in their countries in the past six months, down from 53 percent who said so in September but about the same as in the prior three surveys. The same share, 40 percent, say conditions have stayed the same, up from 30 percent in the previous survey. Meanwhile, the share reporting improvement in their economies—about one in five—has remained consistent since the June survey.

As was true in the previous survey, respondents in Latin America are the most sanguine about current conditions (Exhibit 3). Respondents in India and other developing markets remain more likely to express negative views than those in other regions. For the second quarter in a row, nearly eight in ten respondents in India say conditions there have worsened, and about six in ten in developing markets say the same.

Respondents in India and Latin America—who are the least and most upbeat on current domestic conditions—are the most positive about the months ahead.
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Respondents in North America and Europe are less likely than those elsewhere to say conditions at home have declined. But as they look ahead to the next six months, they are among the least optimistic, along with respondents in developing markets.

Overall, respondents are less likely than in September to expect their countries’ economies to worsen. Forty-three percent expect conditions to decline in the first half of 2020, down from 51 percent who predicted declining conditions in September. Yet views remain more negative than positive: one-quarter expect their economies to improve, in line with the previous survey, and the remainder expect no change.

Across regions, respondents in Latin America are the most positive about their countries’ prospects for the second survey in a row. Forty-five percent say they expect improvement in their economies—a similar share as in September. Similarly, these respondents are the most likely to expect their countries’ growth rates to increase, and for their unemployment rates to decrease.

On the question of growth rates, respondents are less likely than in the previous survey to expect their countries’ growth rates to contract in the months ahead: 43 percent say so, compared with 51 percent in September. These findings resemble those from December 2018 through June of this year.

Concerns over trade remain high, and social unrest emerges as a threat

Trade concerns remain center stage for executives, and half of respondents say trade levels between their countries and the rest of the world have declined over the past year. About one in five report an increase in trade—in line with September’s findings. But a smaller share than in the previous survey expect trade levels to decrease in the year ahead: 43 percent, compared with 52 percent in September.

Trade conflicts top the list of cited risks to global economic growth over the next year, as they have throughout 2019 (Exhibit 4). Sixty-five percent of respondents cite this risk, down from 73 percent in September and three-quarters in June.

Trade-related risks still predominate as threats to global and domestic growth, but social and political risks have risen on the list of commonly cited threats.
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Similarly, for the third quarter in a row, trade-policy changes are the most commonly cited risk to domestic growth. Nearly four in ten say it is a top risk. As has been true throughout 2019, changes in trade policy remain an outsize concern in North America, where 53 percent of respondents say they are a threat. That is down from 63 percent in the region saying so in September.

Other top risks to global and domestic growth have reemerged. For the first time since September 2017, social unrest is among the top five most cited global risks. The share of respondents citing unrest—20 percent—has doubled since September, and the percentage in developed Asia–Pacific and Latin America deeming it a risk has more than tripled. Overall, social unrest continues to rank below trade conflicts, geopolitical risks, and trade-policy changes, which have been the top concerns throughout 2019.

Looking at the risks affecting respondents’ countries, political risks have become more top of mind in recent months. Domestic political conflicts are the second most commonly cited risk, behind trade-policy changes and overtaking geopolitical instability as a concern since the previous survey. Furthermore, 34 percent say these conflicts are a threat, up from 28 percent who said so in September. As has been true throughout the year, political conflicts are of outsize concern in Latin America, where they are the most commonly cited risk, identified by 52 percent of respondents. In addition, transitions of political leadership are again listed among the top five perceived threats to respondents’ economies, as they were in March and June.

Download Economic Conditions Snapshot, December 2019: McKinsey Global Survey results (PDF–328 KB).


About the author(s)

The contributors to the development and analysis of this survey include Alan FitzGerald, a senior expert in McKinsey’s New York office; Vivien Singer, a specialist in the North America Knowledge Center; and Sven Smit, a senior partner in the Amsterdam office.

Survey

Economic Conditions Snapshot, September 2019

Respondents’ views are subdued on the current state of the global economy, and on their home economies in the months ahead. Trade conflicts and trade-policy changes remain the most commonly cited threats to growth.

In McKinsey’s latest survey on economic conditions, executives’ views on the current global economy and expectations of future global growth are less favorable than they have been in years. 3 In sizing up their home economies, respondents are evenly split, with roughly one-half taking a positive or stable stance. Overall, trade conflicts and changes in trade policies remain the foremost concerns for global and domestic economic growth.

While respondents in emerging economies report sluggishness in the global economy and at home, they are more optimistic than their developed-economy counterparts about future global and domestic prospects. In India, a bulwark of positive sentiment over many past surveys, views have turned negative about current domestic conditions, although most expect improvement or a leveling out in the months ahead. By contrast, respondents in developed Asia–Pacific economies and in Latin America offer brighter views than in the previous survey about current conditions. 4

Increasingly uneasy views of the global economy and its prospects

Respondents’ perspectives on the current global economy have become more subdued over recent months. Seventy-four percent of respondents say global economic conditions are worse now than six months ago—the highest share since we began regularly asking in March 2012. The share of respondents saying the global economy is worse now than six months ago has increased over the past year (Exhibit 1). 5

The share of respondents saying the global economy is worse now than six months ago has grown over the past year.
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Respondents in developed economies are more likely than their emerging-economy peers to say global economic conditions stayed the same over the past six months, while emerging-economy respondents are more likely to say conditions declined.

Expectations for the coming months also are less rosy than in all previous surveys, dating back to March 2011. Two-thirds of respondents say they expect global economic conditions to worsen in the next six months, a larger share than in March 2019 (Exhibit 2). Similarly, two-thirds predict that the global growth rate will contract in the next six months, compared with 44 percent who said so in March—although most of these respondents say they expect a minimal contraction. Concern about future economic conditions is more pronounced among respondents in developed economies: 70 percent of those respondents predict declines over the next six months, compared with 59 percent of emerging-economy respondents.

Respondents are likelier now than in March to report negative expectations for the world economy and future global growth.
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In addition, respondents have become more negative about the global economy’s momentum over the long term. When asked to rank the likelihood of four global scenarios in the decade ahead, 6 70 percent of respondents said the most likely was one of two—global deceleration or rolling regional crises—that involve lower levels of growth. That’s up from 60 percent who ranked either of these scenarios as most likely in June and 52 percent who did so in September 2018.

At home, economic perceptions are more evenly split

Compared with perceptions on the global economy, respondents’ latest views on current economic conditions in their home countries are more evenly split, although assessments have grown more negative since the previous survey. The 52 percent who say their home economies are worse than six months ago represent the greatest share to have said this since we began regularly collecting data on this question in February 2010. In the latest survey, 30 percent say there has been no change in the past six months, while 18 percent say conditions improved.

As in the previous survey, larger shares of emerging-economy respondents than developed-economy respondents say their home economies have worsened (59 percent, compared with 49 percent among developed-economy respondents). That sentiment among emerging-economy respondents is more negative than respondents in those economies predicted earlier this year.

In particular, in India—the area that in the previous six surveys had the highest percentage of respondents with positive viewpoints—economic conditions are not meeting expectations from six months ago. In March, just 14 percent of respondents in India said they expected their economy to worsen in the six months ahead. But in the present survey, nearly eight in ten respondents say it has worsened, up from roughly three in ten who offered that assessment in June (Exhibit 3). Looking ahead, though, two-thirds of respondents there expect improvement or a leveling out in the next six months. By contrast, respondents in developed Asia–Pacific and in Latin America offer brighter assessments of current conditions than in the previous survey.

In India, respondents’ views of current conditions at home have turned negative since June, while the opposite is true among respondents in Asia–Pacific and Latin America.
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Sentiments also vary by sector. Respondents in manufacturing are significantly more likely than those in all other sectors to have negative views on their countries’ current economic conditions. Of respondents in manufacturing, 72 percent say conditions have worsened, compared with 41 percent of respondents working in high tech and telecommunications.

Looking at the next six months, respondents are generally split in their expectations of economic conditions in their countries. Overall, a quarter of respondents predict their countries’ economies will improve, and a similar share expect the state of their economies to remain the same (Exhibit 4). However, unease about the future has increased: roughly half of all respondents expect their countries’ economic conditions to worsen in the next six months. That’s the highest this measure has reached since we began regularly asking the question, in February 2010.

The share of respondents who say they expect conditions in their countries to decline in the next six months has increased since last September.
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Emerging-economy respondents are much less likely than their counterparts in developed economies to predict their economies will worsen and their countries’ growth rates will contract in the next six months, as was also true in March.

The trouble with trade

Trade conflicts remain the most commonly cited risk to global economic growth, as they have been throughout 2019. In line with the June findings, about three-quarters of respondents rank trade conflicts as one of the biggest potential risks to economic growth in the global economy over the next year. Similarly, when asked about the biggest risks to their home economies over the next year, respondents, for the second survey in a row, most often cite changes in trade policy as a top risk.

As we’ve seen since March 2018, changes in trade policy continue to be an outsize concern in developed economies, where they are cited by 49 percent of respondents as a top risk to their economies, compared with 34 percent of respondents elsewhere. Meanwhile, concerns about the risks of economic volatility are on the rise among emerging-market respondents. In a change from previous surveys, emerging-economy respondents are twice as likely as others to cite increased economic volatility as the biggest potential risk to global economic growth. Just under one-third in emerging economies list volatility as a top concern, compared with 16 percent of others.

These ongoing concerns over trade coincide with respondents reporting declines in trade levels between their countries and the rest of the world, as well as expectations that the volume of trade will continue to decrease. Respondents are much more likely than they were one year ago to say trade volumes have declined in the past 12 months (Exhibit 5). Looking ahead, about half of all respondents predict that the level of trade will decline over the next 12 months, as the findings also showed in June.

Respondents are more likely than they were one year ago to say trade levels between their countries and the rest of the world have declined.
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Download Economic Conditions Snapshot, September 2019: McKinsey Global Survey results (PDF–366 KB).


About the author(s)

The survey content and analysis were developed by Alan FitzGerald, a director of research in McKinsey’s New York office; Vivien Singer, a knowledge expert in the Waltham, MA, office; and Sven Smit, a senior partner in the Amsterdam office.

Survey

Economic Conditions Snapshot, June 2019

Executives’ sentiments on the global economy are the lowest in years, amid growing concerns over trade conflicts. Meanwhile, their expectations about conditions at home remain more negative than positive.

Executives’ views of the global economy are more downbeat than they have been in years, and few expect improvements in the months ahead, according to McKinsey’s latest survey on economic conditions. 7 In fact, in every region, respondents are more likely to say conditions in the global economy and their home countries have declined in recent months. What’s more, for the first time since we began asking about expectations for the global economy in 2011, a majority of respondents say they expect the economy to worsen in the next six months. Concerns about trade have grown since the previous survey, and a rising share of respondents predict that the level of trade between their home countries and the world will decline over the next year. Among regions, there are some bright spots: respondents in Latin America and India offer more positive expectations than their peers elsewhere on trade levels and their economies’ prospects. Meanwhile, those in developed Asia are particularly glum across a range of macroeconomic and company-level issues. 8

Cautious views of the global economy

The share of respondents saying the global economy is worse than six months ago has more than doubled over the past year.
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The share of respondents reporting recent declines in global economic conditions has not been this large in several years, and their expectations for the next six months are no more positive. Nearly six in ten respondents in June say current conditions in the global economy are worse now than six months ago—the largest share to say so since September 2015. Compared with one year ago, the share of respondents reporting declines in the global economy has more than doubled (Exhibit 1).

When asked about the next six months, respondents are similarly wary: 57 percent say they expect global economic conditions to decline in the next six months—a larger share than has said so in any survey since we began asking about future conditions in the global economy in March 2011. In contrast with the previous survey, respondents in every region are now more likely to expect the world economy to decline than to improve.

Concerning the expected rate of global growth, the share of pessimistic responses is larger than we have seen previously. For the first time since we began asking about changes in the global economy’s growth rate, a majority of respondents predict that the growth rate will slow in the next six months. 9 Whereas in March 2019, 44 percent of respondents said they expected the growth rate to slow, now 55 percent say so.

When respondents identify risks to global economic growth in the year ahead, they most often cite trade conflicts, as they did in the March survey. Further, the share citing trade conflicts as a risk has increased since March (Exhibit 2). As in the previous survey, geopolitical instability is the second most commonly cited risk to growth, followed by changes in trade policy. Like trade conflicts, changes in trade policy are cited by a larger share now than three months ago.

The share of respondents citing trade conflicts as a top risk to global economic growth has grown since March 2019.
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For home economies, modest expectations amid concerns about trade

While respondents appear less downbeat about their home economies than about global conditions, their assessments are more negative than positive: 22 percent of respondents say conditions are better now than six months ago, while 43 percent say their economies have declined—in line with the results from three and six months ago. In contrast to the earlier surveys, larger shares of respondents in every region now say conditions have declined than say their economies have improved.

In the next six months, respondents continue to be more likely to predict their home economies will worsen than to predict improvement, as they have been since September 2018. The only regions where respondents are more likely to expect improvements than worsening conditions are India and Latin America.

Since the previous survey, concerns over trade-policy changes as risks to near-term domestic growth have grown. Policy changes are now cited most often, with 47 percent of respondents saying changes in trade policy are risks to their countries’ growth in the next year—up from about one-third who said so in March 2019 (Exhibit 3).

Trade-policy changes have become the most-cited risk to domestic growth.
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As in the past two surveys, larger shares of respondents say trade levels between their countries and the rest of the world declined than increased over the past year. What’s more, respondents who report changing trade levels are three times more likely to say those changes had a negative effect on their business than to report a positive impact. This is a decline from March, when respondents were twice as likely to report negative effects than positive ones.

Looking ahead, expectations for future trade levels also have declined since the previous survey. Nearly half of respondents predict the level of trade between their countries and the rest of the world will decline over the next year (Exhibit 4). This is the largest share to say so since 2016, when we first asked this question. By region, majorities of the respondents in Latin America and in India say trade will increase in the year ahead. But in all other regions, respondents are much more likely to expect a decline than an increase.

Expectations for future trade levels have declined since the previous survey.
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Developed Asia’s pronounced pessimism

Respondents in developed Asia offer notably gloomier views, compared with the previous survey and with their peers elsewhere, about the world economy, conditions at home, and their companies. Not only are they more likely now than three months ago to say the world economy has worsened (Exhibit 5), they are more likely to say so than respondents in any other region. Similarly, these respondents are more than three and a half times likelier to say they expect the growth rate of the global economy to slow down than to say they expect it to increase—and more likely to say so than respondents in any other region.

Respondents in developed Asia report a more negative view on the world economy and future global growth now than in the previous survey.
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Developed Asia also is the region where the largest share of respondents—59 percent—say conditions in their home economies have declined over the past six months. Whereas in March, respondents in the region were about twice as likely to report a decline than an improvement, they are now more than five times as likely to say so.

In regard to trade levels, respondents in developed Asia are more likely now than in March to report declining trade between their countries and the rest of the world: 60 percent now say so, compared with 46 percent in the previous survey. This is the second survey in a row in which respondents in the region are more likely than their peers elsewhere to say changes in the level of trade have had a negative effect on their business.

Respondents in developed Asia also report lower expectations for their companies. They are less likely than those in other regions—and less likely than the region’s respondents in March—to predict their companies’ profits will increase in the next six months (Exhibit 6). And in a change from March, respondents in the region also report the most negative workforce-size expectations of any region: more than one-third now predict that their workforces will decrease in the coming months, compared with a global average of 23 percent.

In developed Asia, respondents’ expectations for their companies have dipped since March 2019.
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Download Economic Conditions Snapshot, June 2019: McKinsey Global Survey results (PDF–410 KB).


About the author(s)

The survey content and analysis were developed by Alan FitzGerald, a director of research in McKinsey’s New York office; Vivien Singer, a knowledge expert in the North America Knowledge Center; and Sven Smit, a senior partner in the Amsterdam office.

Survey

Economic Conditions Snapshot, March 2019

Respondents report an overall wary economic outlook and are increasingly concerned over trade. Yet there are signs of optimism among emerging economies and for companies’ prospects.

Global executives’ views on the economy remain more gloomy than upbeat for the second quarter in a row. 10 In McKinsey’s newest survey, few respondents believe that economic conditions have improved in recent months or will improve in the months ahead. They also share concerns over trade—namely, a recent decrease in trade levels between their home countries and the world and the prominence of trade conflicts as a threat to global growth. 11 Yet the results suggest a glimmer of optimism in emerging economies. For the first time in four surveys, these respondents are more positive than their developed-economy peers about current and future conditions in their home countries, as well as in the world economy. What’s more, emerging-economy respondents are as optimistic as—and in some cases, more hopeful than—others about their companies’ business prospects, which respondents across geographies believe to be strong.

Amid overall cautious views, some emerging-economy optimism

As in the previous survey, respondents express unfavorable views on the state of their home economies. Just one-quarter of all respondents say current economic conditions at home are better than they were six months ago, while 36 percent say conditions have worsened. By region, the respondents least likely to report improvements are those in Europe and North America (Exhibit 1). 12

Respondents in Europe, North America, and developed Asia are the least upbeat about the state of their home economies.
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Overall views on the world economy also remain more gloomy than buoyant. Just 16 percent of respondents report improved global conditions in recent months. Looking ahead, only 19 percent predict global economic conditions will improve in the next six months, compared with 45 percent who believe conditions will worsen. What’s more, when asked specifically about the rate of global growth, the share of respondents expecting higher growth rates has been shrinking (Exhibit 2). Just 34 percent say so now, while roughly two-thirds of respondents said the same one year ago. At the same time, the share expecting the global growth rate to contract is down slightly since the previous survey—while the share expecting no change has increased.

In the past year, respondents have become less and less likely to expect an increase in the world economy’s growth rate.
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Still, in a turnaround from the past three surveys, respondents in emerging economies report more upbeat views of the economy—both at home and globally—than their counterparts in developed economies. One-third of emerging-economy respondents, compared with 22 percent of their developed-economy peers, say conditions in their home economies have improved in the past few months. This is in contrast with earlier surveys, in which the shares reporting improved conditions were larger or roughly equal in developed economies compared with emerging ones (Exhibit 3). On the world economy, too, emerging-economy respondents offer rosier assessments than their peers, with only 36 percent—compared with 48 percent in developed economies—saying that global economic conditions have worsened in the past six months.

For the first time in four surveys, respondents in emerging economies report more upbeat views about domestic economic conditions than their peers.
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In the two groups’ outlooks for the months ahead, there’s an even clearer rift. Respondents in emerging economies are twice as likely as those in developed economies to expect their countries’ economic prospects will improve in the next six months. Larger shares of emerging-economy respondents—52 percent, compared with 36 percent of their peers—expect their countries’ growth rates will increase in the months ahead. And when asked about the global economy’s prospects, respondents report similarly divided views. 13

Global concerns over trade

The newest results suggest that trade is becoming a more significant pain point for the year ahead. When asked about changing trade levels between their home countries and the rest of the world, respondents are more likely to report a decline than they were in all of 2018 (Exhibit 4)—and since we began asking the question, in December 2016. Across regions, respondents in North America are the most likely to report a decline (56 percent, up from 44 percent in the previous survey), followed by their peers in developing markets. 14 Respondents in India are most likely to report an increase.

Growing shares of respondents report declining levels of trade between their home countries and the rest of the world.
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Meanwhile, a growing share of respondents say the effect of changing trade levels on their companies’ business has been negative. Thirty-six percent now report adverse effects on the business, up from 25 percent in September and 17 percent one year ago.

Trade also is top of mind as a risk to macroeconomic growth. Nearly two-thirds of respondents cite trade conflicts, one of several risks we had not asked about in previous surveys, as a threat to global economic growth in the next 12 months (Exhibit 5). The threat of trade conflicts is followed by geopolitical instability and changes in trade policy, the latter of which was the most-cited risk to global growth throughout 2018. By geography, respondents in emerging economies are likelier than their developed-economy peers (70 percent, compared with 61 percent) to cite trade conflicts as a risk to global growth, though it is the threat cited most often among each group. Overall, respondents also identify changes in trade policy as a top-two risk to growth in their home countries, as it was for all of 2018.

A new risk—trade conflicts—tops the list of potential threats to global growth in the next year.
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Promising company prospects

When asked about the future of their own organizations, respondents report an overall buoyant outlook. Predictions for workforce size remain more positive than negative, and expectations for future demand are high: 56 percent of all respondents expect that demand for their companies’ offerings will increase in the next six months. Hopes for profits also are higher than they were previously, with 64 percent of respondents predicting their companies’ profits will increase over the next six months—up from 58 percent in the past two surveys.

Meanwhile, respondents note some new risks, as well as opportunities, for the year ahead. The most commonly cited risks to company growth are ones we had not asked about in previous surveys: policy and regulatory changes (33 percent) and weakening customer demand (30 percent). Emerging-economy respondents cite weakening demand and policy and regulatory changes more often than their peers elsewhere, while scarcity of talent is a greater concern among developed-economy respondents. When asked to identify the best opportunities for companies in the next 12 months, the most common answer is the shift to new technologies (Exhibit 6), which was cited most often for the first time since we began asking the question three years ago.

For the first time, a shift to new technologies has emerged as the top opportunity for growth at respondents’ companies.
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We also asked about companies’ investment decisions, and, since 2017, the results suggest that investment budgets are increasing. Half of respondents say their budgets, as a share of company revenue, have increased in the past three years. Two years ago, when we last asked these questions, 43 percent of respondents said the same.

Nevertheless, the results suggest that the supply of attractive investments is outpacing companies’ capacity to invest. Only one in five respondents say the current supply of investments is about equal to their investment ability. In contrast, 45 percent say there are more opportunities than can be funded, and just 18 percent report fewer opportunities than can be funded, which is a more common problem for companies based in emerging economies than in developed ones. Among respondents reporting a surplus of opportunities, respondents most often say the things keeping their companies from investing are insufficient funds, lack of capabilities to execute the investment, and risk aversion within the company. Risk aversion also is a top barrier among respondents reporting scarce opportunities, along with uncertainty about the investment’s future relevance and political uncertainty in the company’s home country.

The main reasons given for potential increases in investment budgets remain the same as two years ago. Over half of respondents say their companies would increase the investment budget to develop new offerings, and 40 percent say they would budget more to improve sales.

Download Economic Conditions Snapshot, March 2019: McKinsey Global Survey results (PDF–1.2 MB).


About the author(s)

The contributors to the development and analysis of this survey include Alan FitzGerald, a senior expert in McKinsey’s New York office; Vivien Singer, a specialist at the North America Knowledge Center; and Sven Smit, a senior partner in the Amsterdam office.