economic snapshot.pdf

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Amid persistent concerns over sluggish demand, executives report a more positive outlook

for the global economy and their own companies.

Executives are ending the year with an outlook thats more positive than negative,

though they remain concerned that overall anemic consumer demand will threaten growth,

according to our most recent survey on economic conditions.1

Respondents views on country-level prospects differ notably by region. Those in developed Asia,

for example, are more likely than their peers to say current conditions in their countries have

worsened and that future conditions will improve. Across regions, new concerns have emerged:

executives in developed economies are much more likely than they were in September to cite

insufcient support from government (that is, a lack of scal or monetary policies that support

economic and business activity) as a risk to domestic growth.

Beyond the more optimistic global outlook that respondents report, the latest results indicate

two other bright spots. Executives broadly believe that demand for their companies

products or servicesas well as their companies protswill increase in the next six months,

despite their concern about sluggish global and domestic demand. They also predict that

emerging markets will continue to drive global growth and are less likely to expect a sharp

slowdown in Chinas growth over the next year and the next decade than they were

in September.

Economic Conditions Snapshot,December 2012

McKinsey Global Survey results

1The online survey was in the

eld from December 3 to

December 7, 2012, and received

responses from 1,575 executives

representing the full range

of regions, industries, company

sizes, tenures, and functional

specialties. To adjust for differ-

ences in response rates, thedata are weighted by the contri-

bution of each respondents

nation to globa l GDP.


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2 Economic Conditions Snapshot, December 2012McKinsey Global Survey results

% of respondents1

Expected conditions in global economy, in 6 months

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

Substantially

better

Moderately

better

The same Moderately

worse

Substantially

worse

Dec 2012,

n = 1,57541 32 22 3

Sept 2012,

n = 2,05835 34 243

Mar 2012,

n = 2,06031 18

Dec 2011,

n = 2,29925 31 39 5

June 2012,

n = 1,34919 32 42 6

2

1

1

2

4

3 45

Exhibit 1

Improved global outlook

Global hope and hazards

At years end, the largest share of executives (40 percent) say current conditions in the global

economy are the same as they were six months ago. This is a slightly more positive view than

three months ago,2 when the same shareand the largestsaid conditions had worsened.

Looking ahead, executives are more optimistic: 43 percent say they expect the global economy

will be better six months from now, up 17 percentage points since last December (Exhibit 1).

2See Economic Conditions

Snapshot, September 2012:

McKinsey Global Survey results,

mckinseyquarterly.com,

October 2012.


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But their responses on risks to growth temper their more positive view. As in our two previous

surveys, sluggish consumer demand tops the list of threats to global growth over the next

12 months, and low demand is of particular concern among executives in the eurozone and

developed Asia (Exhibit 2). Those in developed Asia are also the most likely to say inter- national demand for their countries products and services will increase in the next few months,

with half of respondents there saying so; only 39 percent of executives in developing markets3

say the same.

When asked about the likel iest shocks to the global economy, more than 90 percent of executives

expect to see geopolitical risks in the Middle East and North Africa next yeara share similar

to what we observed in September. Given that this survey was elded in early December (and co-

incided with the budget debate in Washington, DC), respondents also express a strong view on

% of respondents, by office location

Top risks to global economic growth, next 12 months

1Includes China and Latin America.

Asia-Pacific,

n = 123

Total,

n = 1,575

Eurozone,

n = 303

North

America,

n = 491

India,

n = 152

Developing

markets,1

n = 240

Low consumer

demand 50 57 53 58 37 38

One or more

sovereign-debt

defaults

41 48 42 35 39 44

Geopolitical

instability39 31 42 31 30 47

Increased

economic

volatility

30 19 25 28 32 36

Lack of accessto credit

27 31 18 44 20 23

Exhibit 2

Acute concerns about demand in the eurozone, Asia-Pacific

3Includes China and

Latin America.


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% of respondents1 whose office location is in Asia-Pacific

Current conditions in respondents

countries, compared with 6 months ago

Expected economic conditions in

respondents countries, in 6 months

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

June 2012,

n = 14621 45 34 19 46 35

Sept 2012,

n = 23822 35 43 30 35 35

Dec 2012,

n = 12315 25 59 53 21 26

Mar 2012,

n = 22436 2836 24 2749

Better The same Worse

Exhibit 3

Split views in developed Asia

the US governments budget. A larger share of respondents than in September say its at least

somewhat likely that imminent spending cuts and tax increases will go into effect next

year, citing this scal cl iff as the third most likely shock of eight; three months ago, it was

ranked seventh.

If these spending cuts and tax increases do go into effect, the global consensus is that US

economic growth will suffer: 70 percent of all executivesand 82 percent of those in the United

Statessay so. But respondents in the United States are more skeptical than others that

the country will go over the cliff: 21 percent of respondents there (compared with 16 percent of

all respondents) say its not at all likely to happen.

No country-level consensus

On average, respondents have a slightly more positive view of current and future conditions

in their home countries than they did in September. However, they are still inclined to say things

are worse now than they were six months ago: 30 percent of executives rate conditions in

their countries as better now, while 38 percent say conditions are worse.

Opinions diverge across regions, and the results from developed Asia are particularly noteworthy

(Exhibit 3). With 59 percent of executives there saying current conditions in their home

countries are worse now than six months ago, domestic views in this region are more negative


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than they have been in the last few surveys. But the outlook in developed Asia is among the most

optimistic: 53 percent of executives in the region say conditions in their countries wil l be

bettermore than three times the share who say current conditions have improved in the past

six months. Furthermore, their expectations for the global economy are more positive than

they have been all year, with 45 percent expecting conditions to improve in the next six months.

Executives in India continue to be the most positive about their countrys prospects, while those

in the eurozone are still the likeliest to expect conditions will worsenas has been the case for

all of 2012 (Exhibit 4).

% of respondents,1 by office location

Expected economic conditions in respondents countries, in 6 months

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

Dec 2012

Sept 2012

June 2012

Mar 2012

Asia-Pacific,

n = 123

Eurozone,

n = 303

North

America,

n = 491

India,

n = 152

Developing

markets,2

n = 240

Better

53

30

19

49

49

43

38

46

23

32

18

32

55

56

28

65

45

46

36

59

The same

21

35

46

24

25

32

31

36

37

27

38

35

30

25

33

21

29

32

41

30

26

35

3527

26

25

3218

40

40

4533

16

19

4014

26

22

2311

Worse

Exhibit 4

Hope in India, doubt in the eurozone


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With respect to risks that threaten domestic growth, low consumer demand tops the list

for the sixth survey in a row. A lack of scal or monetary policies that support economic and

business activity also has emerged as a concern, especially in developed economies. In the

eurozone, for example, 29 percent of executives cite insufcient support from government as athreat to growth (Exhibit 5), compared with only 19 percent who said the same in September.

Confdence in companies and emerging markets

Overall, executives maintain an optimistic view of their companies short-term prospects.

More than half of respondents predict that company prots will increase in the next six months.

And in contrast to the relatively gloomy view of demand at the global and domestic levels,

% of respondents, by office location

Top risks to domestic economic growth, next 12 months

1Includes China and Latin America.

Asia-Pacific,

n = 123

Total,

n = 1,575

Eurozone,

n = 303

North

America,

n = 491

India,

n = 152

Developing

markets,1

n = 240

Low consumer

demand 49 53 40 65 20 45

Insufficient

support from

government

Transitions ofpolitical leadership

32 14 25 50 19 30

28 32 22 29 36 28

Increased

economic

volatility

25 22 18 22 18 34

Lack of access

to credit

24 31 32 26 47 14

Exhibit 5

Desire for greater support


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a plurality of executivesfor the rst time since Marchexpect demand for their companies

products or services to increase (Exhibit 6). Nevertheless, the results indicate little change in

workforce expectations, with the largest share of executives (44 percent) predicting the size of

their workforces will stay the same.

The results also indicate some renewed optimism about emerging economies. Compared with

September, smaller shares of executives say they expect a sharp slowdown in Chinas growth

in the next year and over the next decade.4 And looking ahead to the next ten years, more respon-

dents than in the previous survey say growth led by emerging markets is the likeliest economic

outcome, while smaller shares now predict that developed and emerging markets a like will face

continued slow growth, challenges such as income inequality and onerous government debt,

and multiple economic shocks.

5

Copyright 2012 McKinsey & Company. All rights reserved.

% of respondents, n = 1,436

Expected changes, next 6 months

Company profits

IncreaseNo change

Decrease

Dont know

5

5720

18

Increase

No change

DecreaseDont know

1

45

40

14

Customer demand for company

products or services

Exhibit 6

Company confidence

4

In the most recent survey,66 percent of respondents say

a sharp slowdown in Chinas

economic growth is at least some-

what likely in the next 12 months,

compared with 83 percent

who said the same in September.

Seventy-six percent say slowing

growth is at least somewhat likely

over the next decade, while

84 percent said the same three

months ago.5

Forty-three percent of

respondents rank emerging-

market leadership as the

most likely outcome for the global

economy, compared with 36

percent who said so in September.Meanwhile, just 19 percent

rank slowed growth in developed

and developing markets as

the likeliest scenario, down from

23 percent who said the same

in September.

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