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The coronavirus effect on global economic sentiment

Economic sentiment has improved since last month, per our latest survey of global executives on COVID-19 and the economy. Still, their near-term outlook remains more negative than positive.

May 2020

Since early April, a growing number of businesses and governments around the world have begun to reopen, ushering in a new—if tenuous—phase of the coronavirus situation. Likewise, the results from our latest McKinsey Global Survey on the economy (conducted from May 4 to May 8, 2020) point to an improving outlook. 1 Executives are much likelier now than in April or March to expect improving conditions and increased growth rates in the months ahead.

Yet executives are still more negative than positive in their expectations for their home economies and the world economy at large, as they were one month ago. And as the results show, the path to a next normal looks very different across regions and industries. Executives in Greater China 2 were the most optimistic about domestic economic conditions in April and remain so this month: 75 percent expect conditions to improve in the next six months, up from 63 percent previously. Half of that share—just 34 percent—say the same in Europe. But even respondents there are notably more positive about their economies than they were one month ago. Among all regions, respondents in India report the largest shift toward positive sentiment since last month.

At the company level, respondents most often cite weak consumer demand as a threat to their organizations’ growth. But other risks loom large in certain sectors. Respondents in financial services, for example, cite volatile financial markets as the biggest threat to company growth. And according to respondents, supply-chain disruptions present an outsize risk in several industries—namely, pharma, chemicals, consumer and packaged goods, and automotive and assembly. What’s more, when we asked respondents in industrial and manufacturing sectors about value-chain disruptions resulting from the coronavirus, 3 only 15 percent say COVID-19 has not caused a material disruption to their value chains, and another one-third say the current disruption is the worst their companies have ever experienced.

For more detail on the survey’s results, please see the exhibits below.

Interactive


April 2020

In our latest survey, global executives report a gloomier outlook than one month ago. Two-thirds expect a sizable contraction in the world economy, and a record share predict declining company profits.

As the COVID-19 pandemic spreads quickly across and within geographies, executives share growing concerns about its economic impact—and, varying by region, dramatic shifts in their views since the beginning of March. 4 Responses to our latest McKinsey Global Survey on the economy, 5 conducted from April 6 to April 10, show that overall sentiment is more negative than it was just one month ago: for example, two-thirds of respondents expect a moderate or significant contraction in the world economy’s growth rate—that is, a recession or a depression. In early March, only 42 percent said the same. And 56 percent say the same thing about growth in their home economies, up from 24 percent one month ago.

Respondents’ overall outlook for their home countries and the global economy has changed less in the past month, though their views remain decidedly downbeat. At least six in ten believe that conditions in their home economies and in the global economy will worsen in the coming months. At the company level, prospects are especially grim. Respondents are nearly twice as likely as they were one month ago to say that the profits of their companies will decrease in the next few months; at 61 percent, that is the largest share to report a negative outlook on profits since we began asking the question, in the wake of the 2008 financial crisis. 6

Even so, the results point to some bright spots. When asked about nine scenarios for the pandemic’s impact on GDP, a majority of respondents say the four more positive scenarios are most likely to play out in the next year (exhibit). 7

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As for the prospects of national economies, respondents in China 8 are much more optimistic than those elsewhere, even compared with their counterparts in the rest of Asia—and much more positive than they were one month ago. Respondents in North America are also likelier than others to expect improvements in the months ahead, even though the number of US cases of COVID-19 exceeded China’s two weeks before the survey was in the field. 9 Respondents in Latin America expect their economies will be hardest hit in the near term, compared with other regions, and sentiment there—as well as in most other geographies—has become more negative since the previous survey.

For more detail on the survey’s results, please see the exhibits below.

Interactive

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 American Knowledge Center; and Sven Smit, a senior partner in the Amsterdam office and a co-chair and director of the McKinsey Global Institute.

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