Economic Conditions Snapshot, June 2011

McKinsey Global Survey results:

Over the past three months, executives around the world have grown more pessimistic about their nations’ economies: compared with three months ago, a smaller share say their economies improved over the past six months, and slightly more expect worsening conditions over the rest of 2011, according to our most recent survey. (…)

Globally, executives are less positive about economic conditions in their countries than they were three months ago; the drops are most noticeable among executives in North America, where the share who say things are better has fallen from 72 percent to 52 percent, and in the developed countries of Asia, from 54 percent to 33 percent. Similarly, the shares of executives in these regions who expect conditions to get worse, though they are small, have risen. No doubt, some of the declining optimism is a reaction to the earthquake and tsunami that hit Japan in March; responses to the March survey were almost entirely collected before those events, so they did not meaningfully affect the data. Nevertheless, the regional differences—in particular, the relatively optimistic findings among executives in Europe— are striking.

Notably, the share of executives in Europe who see improvement has fallen very little compared with the drops among those in North America and the developed countries of Asia, even though the eurozone has been under much-publicized pressure throughout the spring because of Greece’s financial problems. Indeed, 57 percent of all respondents say it’s at least
somewhat likely that the eurozone will splinter within the next two years.

The economic indicator where executives in these three regions differ most is expectations for their countries’ unemployment rates. In developed Asia, the share of executives expecting unemployment to increase has risen six percentage points. In North America, although a stable 10 percent expect higher unemployment, the share expecting a decrease is much smaller (at 37 percent) than it was in March (48 percent).

Overall expectations on inflation also have fallen slightly: in March, 73 percent globally were expecting an increase this year, versus only 69 percent in June. (…) The share that expect increased inflation has fallen most markedly among executives in Asia, from 74 percent to 60 percent, with much smaller, similar drops among respondents in both Europe and
North America.(…)


The global stability masks some distinct regional changes. Among executives in Asia’s developed countries, the share who expect an increase in customer demand has risen from 48 percent to 58 percent since March. Also, the share of these executives who expect to decrease their workforces is up from 4 percent in March to 14 percent now. Both factors suggest why 68 percent of these executives expect a rise in profits in the second half of this year, compared with 63 percent globally. The expectations of executives in North America have shifted in a similar direction, though not as strongly, and 63 percent of them expect
higher profits. A smaller share of executives in Europe expect changes in demand or workforce size, and just 58 percent of respondents there expect higher profits.

Though hiring expectations remain tepid globally, 37 percent of all respondents—and nearly half of respondents in China, India, and other developing markets—say their companies have had job openings they couldn’t fill for six months or more. (…)


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