Executives split on economic conditions, emerging markets most upbeat
Executives globally remain relatively confident about economic conditions in their home markets, finds a new analysis by McKinsey, with emerging market executives considerably more upbeat than the same period last year. Low consumer spending and domestic political challenges remain risks for growth, however, with an almost even split about whether the global economy will pick up or deteriorate in the coming six months.
The global economy, on the back of a slowdown in China, geological uncertainties in the Middle East and the US Presidential election, among others, continues to find itself in a period of uncertainty that has gripped it since the financial crisis. In McKinsey & Company’s newly released quarterly global survey titled ‘Economic Conditions Snapshot, September 2016’, the firm explores current sentiments from 1,967 executive, from every country and industry, around regional and global economic activity.
Expected economic conditions in six months
The survey finds that respondents from developed economies are slightly less confident about their economic outlook for the coming six months than the previous period, while considerably more downbeat, up from 10% to 24%, on the previous period. 44% of respondents from emerging markets, however, say that economic conditions will improve in the coming six months, compared to 35% the previous quarter and 29% in last years’ survey.
Latin American respondents
Particularly Latin American respondents, say that economic conditions have improved in the past 12 months – especially in relation to the same period last year. 25% say that conditions are moderately better, up from 18% in the previous quarter. Relative to September 2015, however, when 62% of respondents stated that conditions had deteriorated during the past six months, conditions have improved significantly.
The majority (51%) of Latin American respondents too remain confident that conditions will improve in the coming six months – considerably more upbeat than the global average of 38%. Respondents in India remain the most confident, with 91% believing that conditions will improve in the coming six months. Chinese respondents too are more upbeat, with 31% stating that they believe conditions will improve, up from 18% the previous quarter.
Growth risks
Latin American respondents remain concerned about domestic politics at far greater numbers than the global average, 52% say that domestic political conflicts represent a risk to growth, compared to 27% for the global average, while transition of political leadership comes in at 35% compared to 28% for the global average.
Globally, 26% respondents continue to identify geopolitical instability as a risk to domestic growth, while China’s slowdown is too cited by 26% of respondents as a risk to growth. Lower consumer demand was cited by 28% of executive as a risk to growth.
Global economic conditions
In terms of global economic conditions, around 24% of respondents say that conditions are better than six months ago, in line with the previous period. Conditions are well up on September 2015, when 62% of respondents said that they were faring worse than the previous six months.
Respondents are split about how they expect conditions to pan out in the coming six months, with 28% saying conditions will improve while 26% believe that they will deteriorate. Respondents are again, slightly more optimistic than during the same period last year.
Eurozone outlook
Even with the recent UK EU referendum potentially panning out negatively for the wider EU economy, respondents are relatively upbeat that the Eurozone regional economy is stable – with 49% expecting minimal growth, and 12% expecting moderate or significant growth. Globally executives remain concern about the Eurozone, with 46% expecting the region to be operating in a contraction situation in the coming six months, while 34% expect it to be operating in an environment of at least minimal growth.
