Global economic sentiment declining

Wondering how business executives around the world are feeling about current economic conditions? In a nutshell, sentiment is declining on the economy, particularly in emerging markets, and more businesses are looking to the United States for opportunities, according to a McKinsey & Co.’s Economic Conditions Snapshot, September 2018, a McKinsey global survey.

For the third consecutive quarter, the survey’s respondents, who represent the “full range of regions, industries, company sizes, functional specialties and tenures,” are less optimistic on the economy and more cautious for the coming months, with 35 percent of participants indicating moderately worse or substantially worse sentiment regarding current economic conditions in their home countries, up from 15 percent six months ago. And while 36 percent of these respondents believe current conditions are moderately or substantially better, this is down from 59 percent in the March 2018 survey.

“Expectations for trade activity are declining, trade-related risks are still perceived as top threats to growth, and for the first time this year, less than half expect the rate of economic growth, both at home and globally, will increase over the next six months.”

This sentiment is more dire for respondents in emerging markets, who have a more negative overall assessment of the global economy, economic conditions in their own countries, and their companies’ prospects. In some instances, these executives view U.S. opportunities as better for their businesses than those in their own or nearby economies.

For all respondents, worsening sentiment about their own and neighboring countries’ economic prospects is in contrast to the survey conducted six month ago, with current results suggesting the best business opportunities may be shifting from emerging economies (such as China and Brazil) toward developed economies, such as the United States. In developed Asia, respondents now cite the United States most often for their best business prospects. In the past two surveys, participants in developed Asia chose China and Japan most often. This is also the case in India, where respondents from the country now view the opportunities for their businesses as being better in the United States than in India, which was citied most often in McKinsey’s past two surveys. In Latin America, participants are now less likely to cite Brazil for the best business prospects than they did six months ago, but in both Latin America and in North America, Mexico is now viewed as a more attractive business destination.

Looking ahead six months, respondents in emerging economies are also less optimistic than their counterparts in developed economies regarding their workforce size, demand for company products and/or services, and company profits.