Economic conditions outlook during turbulent times, September 2023

| Survey

For the second quarter in a row, respondents to the latest McKinsey Global Survey on the economy share more of a positive than negative outlook. But their views on current and future conditions in the global economy have converged, with a more even split between optimism and pessimism.1 Overall, respondents are also more hopeful than not about their countries’ economies, though sentiments vary significantly by region.

In Europe, where respondents are most concerned about the effects of inflation, expectations for the next six months have turned more negative, whereas respondents in North America offer increasingly brighter views. Perceived top economic risks have also shifted since the previous survey. While geopolitical instability and inflation remain two of the most frequently cited risks to the global economy and respondents’ home countries, respondents, particularly in Asia–Pacific,2 are closely watching China’s economic activity. Overall, concerns for those risks supersede the perceived threat of rising interest rates.

When asked about their own companies’ prospects, respondents are largely hopeful, with the greatest share since late 2021 expecting profits to increase in the months ahead. Respondents also predict meaningful changes to the office space their companies will need over the next few years, with many reporting the implementation of strategies that would reduce the need for such space.

Views of the economy continue to lean toward the positive for a second quarter

In our March survey, respondents tended to see the global economy as worse off than it had been six months earlier, and they were equally split on whether the coming months would bring improvement or stagnation. The past two quarters’ results suggest more favorable views of global economic conditions, both backward- and forward-looking: overall, respondents are more likely to share positive than negative sentiments (Exhibit 1).

For the second consecutive quarter, respondents’ views on global growth lean more positive than negative.

Likewise, for the second quarter, respondents are more likely to be upbeat than downbeat about how their countries’ economies have changed over the past six months, though sentiments have changed in different directions by region (Exhibit 2). Respondents in North America offer more positive assessments of their economies now than they did in the two previous quarters, whereas the opposite is true in Asia–Pacific. Respondents in India and Europe had rosier views in June than in March but have since grown more wary.

Views on the state of respondents’ home economies continue to vary greatly by region.

Similar fragmentation exists when respondents look ahead to the next six months (Exhibit 3). Respondents in Europe are much less likely now than in March and June to expect improvements in their countries’ economies and are now the least optimistic group across regions. Over the same period, respondents in India and North America have become more hopeful about the months ahead.

In Europe, economic expectations for the next six months have turned more negative, while responses in India and North America have become brighter.

Expected risks from economic slowdown in China supersede interest rate concerns

While geopolitical instability and conflicts remains the most-cited risk to global growth for the sixth quarter in a row, an economic slowdown in China has emerged in the latest survey as a risk to both the global economy and to respondents’ domestic economies. China’s slowing economic activity—added as an answer choice in the latest survey3—is the second most-cited risk to the global economy, with 41 percent of all respondents saying it’s a concern.

Inflation is top of mind as an economic risk, particularly in Europe, while respondents in Asia–Pacific are focused on China’s economy.

Overall, smaller shares of respondents note concerns about the economic effects of changing interest rates. Rising interest rates drops from being one of the top three most-cited risks to the global economy in June—and one of the top five risks since December 2021—to the seventh most-cited this month, and also falls from the list of top three risks to growth in respondents’ countries. The share of all respondents expecting interest rate increases in their countries continues to decline, as it has since September 2022 (Exhibit 5).

The share of respondents expecting their countries’ interest rates to increase continues to diminish.

Promising company prospects, with varying approaches to companies’ physical footprint

Private sector respondents offer positive outlooks for their companies over the next six months. The share expecting their companies’ profits to increase is the highest in nearly two years, with two-thirds saying profits will increase, and most respondents continue to expect customer demand to grow as well.

This quarter’s survey also asked private sector respondents about their companies’ plans for their office space over the next few years. Respondents are about equally as likely to expect that, two years from now, their companies will own or lease more space as they are to expect a decrease in space; about 30 percent offer each prediction. By region, the respondents most likely to expect office space decreases work in Asia–Pacific and Europe, while respondents in Greater China, India, and other developing markets4 lean toward footprint increases. Even among respondents who believe their companies will expand their workforces in the next six months, expanding office space isn’t a sure bet; only half expect their space to grow (Exhibit 6). What’s more, 30 percent of respondents who expect no head count changes predict decreasing office space, double the share that expects space will increase.

Respondents who expect their workforce size to remain stable are more likely to expect their office space to decrease than increase.

When asked how their companies are implementing their commercial real estate strategies, respondents report a variety of actions. Those who expect their companies’ office space to decrease most often say their companies are implementing remote or flexible working policies, redesigning offices, and selling or subleasing underutilized space—though redesigning offices and implementing remote-work policies are also among the common actions that all respondents report, regardless of changes in office space.


The survey content and analysis were developed by Jeffrey Condon, a senior knowledge expert in McKinsey’s Atlanta office; Krzysztof Kwiatkowski, a capabilities and insights expert at the Waltham Client Capabilities Hub; and Sven Smit, chair of insights and ecosystems, chair of the McKinsey Global Institute, and a senior partner in the Amsterdam office.

They wish to thank Phil Kirschner and Ryan Luby for their contributions to this work.

This article was edited by Heather Hanselman, an editor in the Atlanta office..


Economic conditions outlook during turbulent times, June 2023

For the first time in more than a year, global executives are more positive than negative about conditions in the economy. In our latest McKinsey Global Survey on economic conditions,5 respondents share brighter views about the current state of their own countries’ economies and the world economy, as well as an increasingly optimistic global outlook. While geopolitical instability and inflation still predominate as risks to both domestic and global growth, respondents note some emergent risks to growth in the world economy. Their responses also suggest an evolving perspective on the interest rate environment, with the smallest share of executives since June 2021 expecting their countries’ interest rates to increase.

Improving views on domestic conditions, with some regional differences

Overall, respondents report more positive views on their home economies than they have in the past year (Exhibit 1). Forty-eight percent say economic conditions at home have improved in the past six months, up from 40 percent last quarter.

Respondents report more positive views on their home economies than they have in the past year.

Respondents share more positive views on their own economies, and the global economy, than they have in the past year.

At the same time, there are some notable changes and differences by region—namely, in India (Exhibit 2). Respondents there report a much more bullish view on the state of their economy than they did in March: 85 percent say conditions are better now than six months ago, versus 46 percent who said the same in March. They are also much more positive about conditions at home than peers in other geographies.

By region, respondents report varied views on the state of their home economies—and some notable changes since last quarter.

By contrast, the domestic economic outlook has held steady since the last survey, with nearly half of all respondents believing conditions will improve in the next six months. Also consistent with last quarter’s results: inflation, geopolitical instability and conflicts, and rising interest rates are still the top three risks to economic growth at home.6

McKinsey Global Surveys

McKinsey Global Surveys

Evolving views on the interest rate environment

Although interest rates remain a top three risk to growth at home, other results suggest a shift in respondents’ perceptions on the topic. For the first time since June 2021, less than half of all respondents believe their home countries’ interest rates will increase in the coming months (Exhibit 3).

The smallest share of respondents in two years believe their countries’ interest rates will continue to increase.

While respondents in emerging economies are more likely to expect the same or lower rates than their developed-economy peers (61 percent versus 42 percent), even those in Europe and North America are less likely to expect rate increases now than they were last quarter or throughout 2022. We also asked about the likelihood that central banks will continue to raise interest rates to control inflation, and 61 percent of all executives believe it’s somewhat or very likely—even if their home countries were to enter a time of severe recession, rising financial-system stress, and increasing unemployment.

As global optimism grows, new risks surface

Executives’ views on the world economy are brightening as well, with a steadily growing share of respondents reporting improved global conditions and a positive outlook for the months ahead (Exhibit 4).

Respondents are increasingly optimistic about current and future conditions in the world economy.

And while they continue to cite geopolitics and inflation as top risks to global growth, respondents have identified some newly emerging threats. The percentages citing income inequality and transitions of political leadership have all grown since our March survey, while the percentages concerned about financial-market volatility and inflation (which remains a top two risk) have ebbed (Exhibit 5).

While geopolitics and inflation still loom as top threats to global growth, the risk landscape has evolved since last quarter.

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For the first time, we also asked respondents about four scenarios for how the global economy and balance sheet might evolve over the long term,7The future of wealth and growth hangs in the balance,” McKinsey Global Institute, May 24, 2023. and their answers suggest a high degree of uncertainty about the economic path forward (Exhibit 6). More than 20 percent of respondents rank three of the four as most likely to occur, with the largest share (30 percent) citing “Balance sheet reset”—characterized by fiscal and monetary tightening and financial-system stress that leads to drawn-out deleveraging and a “lost decade” of growth—as the likeliest scenario. It’s followed closely by “Higher for longer” (29 percent), which involves stronger consumer demand and higher investments (both of which keep interest rates and inflation high), solid growth, and a lower value of real wealth due to inflation.

Respondents report mixed feelings about four scenarios for the global economy’s longer-term future.


The survey content and analysis were developed by Jeffrey Condon, a senior knowledge expert in McKinsey’s Atlanta office; Krzysztof Kwiatkowski, a capabilities and insights expert at the Waltham Client Capabilities Hub; and Sven Smit, chair of insights and ecosystems, chair of the McKinsey Global Institute, and a senior partner in the Amsterdam office.

The authors wish to thank Jan Mischke for his contributions to this article.

This article was edited by Daniella Seiler, an executive editor in the Washington, DC, office.


Economic conditions outlook during turbulent times, March 2023

Executives’ enthusiasm for the economy rose—and then came back to earth. Meanwhile, concerns about financial-market volatility as a risk to growth have increased.

What a difference several weeks can make. For our most recent McKinsey Global Survey on economic conditions, we surveyed executives twice in March—right before the upheaval in the banking sector, starting with the closure of Silicon Valley Bank (SVB),8 and then again three weeks later.9 Executives’ outlook was positive in the initial survey, but that optimism dampened in the second survey. Still, respondents ended the month of March with a more upbeat perspective than they had shared in previous quarters.

Respondents continue to cite inflation and geopolitical instability as top threats to economic growth, though concerns about financial-market volatility rose between the two surveys. Meanwhile, the COVID-19 pandemic has all but disappeared as a perceived source of macroeconomic risk. Even respondents in Greater China,10 who have reported outsize concerns about the pandemic’s economic effects, rate it as a much lower risk than last quarter.

McKinsey Global Surveys

McKinsey Global Surveys

Economic optimism spikes, then moderates, during March

In early March, respondents reported views on the global economy that were more positive than they had been in several quarters. Forty percent said that global economic conditions had improved in the previous six months, the first time in a year that respondents were more likely to report improvements than declines. And 45 percent expected global conditions to improve in the months ahead, while only 28 percent predicted that conditions would worsen.

But by the end of the month, that optimism had tempered (Exhibit 1). Respondents are much less positive now than they were in early March about current global conditions and the global economy’s prospects—though still more upbeat than they had been in the previous quarter.

After reporting their most positive views on the global economy in several quarters, respondents’ outlook had tempered by late March.

We see a similar pattern in respondents’ overall views on their home economies (Exhibit 2). The change in sentiment is especially acute in India: 46 percent of respondents in the late March survey say that conditions at home are improving, compared with 66 percent who said the same earlier that month. Likewise, respondents in North America and developing markets report declining positivity between the surveys, and they are more downbeat now than they were in December 2022. When asked about potential interest rate changes in their countries, respondents are more likely than they have been since June 2020 to expect a decrease in the months ahead, though a majority (60 percent overall) still expect an increase.

Respondents’ enthusiasm for their home economies rose, and then fell, in the month of March.

Geopolitical instability, inflation remain top concerns

When asked about risks beyond their countries’ borders, respondents have shared consistent concerns about geopolitical instability. In early March, two-thirds cited it as a risk to global growth, a share that has steadily increased since September 2022—and a similar share in the late March survey say the same.

At the same time, concerns over financial-market volatility have grown between the two surveys (Exhibit 3). Respondents are more than twice as likely (31 percent) to cite market volatility as a top global risk as they were in early March (15 percent). Our newest survey also marks the first time since March 2019—when we began asking about volatile financial markets as a specific risk—that it’s ranked within the top three risks to global growth. What’s more, respondents in the latest survey rank financial-market volatility as a top three risk to their own companies’ growth.

While geopolitics and inflation persist as top global risks, market volatility became a growing concern between early and late March.

In their home countries, respondents continue to cite inflation most often as a risk to domestic growth. It’s been the top-ranked risk overall since June 2022, and in the most recent survey is cited most often in every region. This is true even in Greater China, where in September and December 2022, concerns over COVID-19 still outranked inflation. Just over half of all respondents in the latest survey expect their countries’ inflation rates to rise over the next 12 months, with respondents in Greater China (74 percent) and Asia–Pacific (63 percent) the most likely to expect increasing inflation.

COVID-19 continues to recede as a major economic concern

The latest surveys also confirm that the pandemic continues to wane as a perceived risk to both macroeconomic and company growth. As a threat to global economic growth, a mere 3 percent of respondents in the late March survey consider COVID-19 to be a top risk, down from a high of 86 percent at the start of the pandemic (Exhibit 4). Of the 15 potential global risks we asked about, respondents cited the pandemic least often in both March surveys.

COVID-19 has all but disappeared as a perceived economic risk.

Even in Greater China, where respondents historically have viewed the pandemic as an outsize risk compared with other locations, the potential threat posed by COVID-19 appears to be on the decline. In late March, just 14 percent of respondents from that region cite the pandemic as a top domestic risk, down from 44 percent in December and 48 percent in September. And most recently, just over half (51 percent) of private-sector respondents in the region say COVID-19 plays a slight role or no role in their companies’ current planning and decision making. That’s up from 28 percent in December and 32 percent in September.

Overall, 72 percent of respondents from the late March survey say that the pandemic plays only a slight or no role in company planning and decision making, compared with 54 to 59 percent who said the same in the past four quarters.

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