Economic conditions outlook, December 2024
Following a year of political elections in numerous countries, including the US presidential election in November, surveyed executives have turned their attention toward changes in trade policy and relationships and other potential policy changes. In the latest McKinsey Global Survey on economic conditions, potential trade policy changes rival geopolitical instability—the most-cited disruption to the global economy throughout 2024—as elements that respondents expect will affect the global economy in 2025.1 Transitions of political leadership remain on respondents’ minds, while respondents increasingly anticipate higher unemployment in their countries and are more inclined than in previous quarters to expect interest rates to increase.
Overall, respondents’ views on the current state of the global economy and their countries’ economies are more cautious than they were in early 2024 but are consistent with last quarter. Respondents continue to be more likely to expect improvement in the months ahead than worsening conditions.
Executives’ focus turns toward potential changes in trade policy and relationships
For the past three years, survey respondents’ concerns about geopolitical instability and conflicts have overshadowed all other potential disruptions to the global economy. The survey asks about the biggest risks to global and domestic growth, and these concerns have also been the most-cited risk to respondents’ home economies since last December. While respondents to the latest survey continue to see geopolitics as a primary disruptive force, they are now nearly as likely to expect changes in trade policy and relationships to affect global growth over the next six months. The share of respondents citing changes in trade policy or relationships as a top risk to the global economy has more than doubled since the previous survey (Exhibit 1). This marks the largest share of respondents citing trade-related changes since December 2019.2 And the focus on trade cuts across regions: the share of respondents pointing to the potential disruptive effects of trade policy changes more than doubled among respondents in Asia–Pacific, Europe, North America, and other developing markets since September.
Looking by region, respondents in North America—where, in the September survey, political transitions were expected to have the biggest effect on respondents’ economies—and in Greater China most often point to trade-related changes as an element that will affect their economies over the next 12 months (Exhibit 2), while respondents in Asia–Pacific and Europe most often cite geopolitical instability.3
Private sector respondents now see changes in the trade environment as one of the greatest potential disruptions to their companies’ performance over the next year. The survey asked about the biggest risks to the growth of respondents’ companies in the year ahead, and changes to trade policies are one of the top five most-cited topics for the first time since September 2019. In a related question about the biggest opportunities for companies, 8 percent of respondents point to the trade environment, in line with previous quarters.4
Policy and regulatory changes are also more top of mind now than they were in the previous quarter. Respondents cited policy changes fourth most often as a risk to company growth in the September survey but bumped this topic up to second in our most recent survey, behind only weak customer demand.
Overall sentiment is stable but more cautious than in early 2024
Respondents’ current sentiments about the state of the global economy remain in line with those they expressed in the previous quarter, although the findings suggest growing uncertainty about interest rates and unemployment rates. Respondents continue to be equally likely to report improving or worsening conditions in the global economy, as they were in the September survey—but the share saying conditions have improved is smaller than it was in early 2024.5 Looking ahead to the next six months, respondents continue to be more likely to expect improving than worsening conditions. Forty-four percent expect improvement, a share that has remained largely consistent throughout 2024.
Overall, respondents’ assessments of their countries’ economies also are consistent with the previous quarter’s but have tempered since early 2024. About four in ten say their economies have improved, as was true in September. But one-third report declining conditions, up from 22 percent who said so in March 2024.
McKinsey’s original survey research
For the third quarter, just under half of respondents predict that their economies will improve in the next six months—a much larger share than those who expect deteriorating conditions. Looking at expectations by region, respondents in Asia–Pacific are the only ones who are much more likely than last quarter to say they expect conditions to improve, while those in Europe have become much more pessimistic (Exhibit 3).
2024 ends with less certainty on interest rates’ trajectory
In the first quarter of 2024, survey respondents primarily expected interest rates in their countries to decrease in the months ahead. They were more than twice as likely to expect lower interest rates than higher rates. Expectations have now shifted, and respondents are nearly evenly split on whether they expect rate hikes, lower rates, or no change (Exhibit 4). Only respondents in Europe and North America are more likely to predict rate decreases than increases.
Respondents anticipate increasing unemployment rates
Respondents are much more likely now than they were in the first quarter of 2024 to predict increasing unemployment rates in their countries (Exhibit 5). Forty-seven percent of respondents expect unemployment to grow in the months ahead, the largest share since December 2020. Respondents in Europe, Greater China, and North America are the most likely to expect an increase.
ABOUT THE AUTHORS
Sven Smit is the chair of McKinsey’s insights and ecosystems, chair of the McKinsey Global Institute, and a senior partner in McKinsey’s Amsterdam office; Jeffrey Condon is a senior knowledge expert in the Atlanta office; and Krzysztof Kwiatkowski is a capabilities and insights expert in the Boston office.
This article was edited by Heather Hanselman, a senior editor in the Atlanta office.
Economic conditions outlook, September 2024
Executives are less upbeat on current conditions than they were earlier this year, though cautiously optimistic about the months ahead. Political transitions are an increasing concern for countries’ economies.
For the first time since March 2020, surveyed executives primarily see the global economy as stable rather than improving. The latest McKinsey Global Survey on economic conditions reveals more cautious sentiments from respondents on both current global conditions and domestic economies than seen in the previous two quarters—though a plurality of respondents expect each to improve in the next six months.1 While geopolitical instability continues to loom as the top perceived risk to global and domestic growth, in a year when almost half of the world’s population will vote in national elections,2 respondents now cite political transitions second-most often as a threat both globally and at home.
Looking at longer-term risks to growth, respondents in all regions see geopolitical instability as the chief global threat in the next ten years. Other areas of greatest concern vary by region, with respondents in Greater China 3 pointing to energy-related topics and those in North America focusing on government-related issues.
At the company level, respondents consider it less and less likely that their companies will increase their workforce size, while expectations for profits and customer demand remain relatively positive and stable.
Respondents report less improvement in economic conditions but remain primarily optimistic
Respondents’ assessments of the global economy and their home economies are less upbeat than they were in March and June, with smaller shares reporting improvement (Exhibit 1). However, the share reporting worse conditions in the global economy hasn’t grown dramatically since the previous survey—rather, a larger share of respondents say there has been no change. For the first time since early March 2020, respondents are more likely to report that conditions stayed the same than report that they improved.
When reporting expectations for the next six months, respondents paint a somewhat cheerier picture for both the global economy and their own countries’ economies compared with the current state. Expectations are consistent with March and June’s findings, with the largest share—42 percent of respondents—expecting the global economy to improve and smaller groups expecting stable or declining conditions. Respondents’ expectations for their countries’ economies over the next six months are also largely aligned with the two previous quarters, with 47 percent expecting improvement—nearly double the share who say their economies will worsen. In every region, a larger share of respondents expects conditions to improve than the share expecting them to decline. Respondents in India and Greater China are the most positive about conditions in their economies over the next six months—and have been all year—while respondents in the rest of Asia–Pacific have become increasingly pessimistic. Just 37 percent of respondents there expect improvement in their economy, compared with 62 percent who said so in March.
Geopolitical instability and political transitions are perceived as top threats globally and at home
Rarely in this quarterly research do we see alignment between the most-cited risks to global growth and to domestic economies. Yet, for the first time in 2024, respondents view geopolitical instability or conflicts and transitions of political leadership, respectively, as the chief concerns both globally and at home in the year ahead, with other cited threats also relating to politics (Exhibit 2).
Geopolitical instability or conflicts, the most-cited global risk since March 2022, is the top concern for global growth among respondents in each region, while transitions of political leadership is the second-most cited for the third quarter in a row. For risks to domestic growth, geopolitics remains the most-cited risk to respondents’ economies for the fourth quarter, and political transitions is now the second-most-cited risk, up from third in the previous quarter, as many countries hold elections this year. Respondents in North America and Asia–Pacific most often point to political transitions as a threat to domestic growth (Exhibit 3).
Views diverge on inflation. Inflation has dropped from the third-most-cited global risk in June to the fifth, with respondents more often sharing concerns about a slowdown in China’s economy and changes in trade policy and relationships. At the same time, inflation has risen from the fourth-most-cited domestic risk to the third. Inflation is the primary concern cited by respondents in developing markets,4 whereas in June, it was their fourth-most-cited risk. Conversely, concerns about inflation have lessened among respondents in North America, where, at the time the survey was in the field, more than three-quarters of respondents expected to see interest rates decrease in the months ahead.5 (The US Federal Reserve cut its key rate by half a percentage point on September 18, 2024.)
Changes in trade policy—a commonly cited risk to global growth in the two most recent surveys—is now also a top five domestic concern for the first time since December 2019. That increase in attention is driven largely by responses in Greater China, where trade is newly top of mind.
Geopolitical instability is also a longer-term concern for respondents
Respondents see geopolitical instability as a top threat to the global economy not only in the short term but also in the longer term. Just over two-thirds of respondents see geopolitical risks as a global concern over the next ten years—the same share seen in earlier 2024 surveys. One of the newest findings is that rising inequality is of increasing concern for the longer term; it is now one of the five most-cited risks for the first time in 2024. The latest data also show that the primary long-term threats are viewed very differently across regions (Exhibit 4). Inequality is of outsize concern in Asia–Pacific and India, and so are extreme weather events. Ineffective government policies and distrust of institutions, meanwhile, are considered larger risks by respondents in North America and Europe than they are by peers elsewhere, and respondents in Europe also cite migration of refugees and asylum seekers as a risk much more often than others do. Energy price volatility and transitions to low-carbon energy sources are outsize concerns for respondents in Greater China.
Muted expectations for company performance and workforce growth
Private sector respondents’ expectations for companies’ performance have held steady since the previous quarter, remaining cautiously optimistic. About half of respondents continue to expect customer demand for their companies’ products or services to increase in the months ahead, and 58 percent expect profits to increase—in line with the share of respondents who said so in the past three quarters. Yet, since last September, respondents have become less likely to expect their companies to expand the size of their workforce (Exhibit 5). Whereas one year ago, respondents were twice as likely to expect an increase than a decrease in the number of employees at their companies, now they are about equally likely to expect a growing or shrinking workforce. Looking by industry, respondents working in consumer goods and retail, energy and materials, and healthcare and pharmaceuticals are more likely to expect a decrease than an increase in head count, whereas in June, only respondents in energy and materials leaned toward expecting a decrease.
ABOUT THE AUTHORS
Sven Smit is the chair of McKinsey’s insights and ecosystems, the chair of the McKinsey Global Institute, and a senior partner in McKinsey’s Amsterdam office; Jeffrey Condon is a senior knowledge expert in the Atlanta office; and Krzysztof Kwiatkowski is a capabilities and insights expert in the Boston office.
This article was edited by Heather Hanselman, a senior editor in the Atlanta office.
Economic conditions outlook, June 2024
Executives’ views on the world economy remain more positive than negative, though they believe a recession is increasingly likely. In their own economies, concerns over unemployment are growing.
So far in 2024, survey respondents seem more sanguine about the economy than they were for much of 2023. In our newest McKinsey Global Survey on economic conditions,1 respondents tend to say that conditions in their countries and globally are improving rather than declining and will continue to improve in the months ahead. Yet they also foresee a few clouds gathering on the horizon.
When asked about four near-term scenarios for the global economy, respondents are much more likely now than they were last quarter to choose the two that result in a recession. They also cite changes in trade policy and relationships as a rising threat to global growth. A growing share of respondents expect unemployment rates in their home countries to increase. And in a few regions, a larger percentage than in March predict interest rate hikes in the months ahead. Meanwhile, the company outlook remains positive, if not more moderate than it was in 2023.
Global sentiment holds steady, even as recession expectations grow
After an uptick in good feelings about the global economy between the end of 2023 and the start of 2024, respondents’ views on current and future conditions are consistent with our previous surveys—and still more positive than in December (Exhibit 1). Respondents in Greater China,2 Europe, and India are the most likely to say global conditions have improved in recent months. By contrast, their peers in Asia–Pacific are the most downbeat. Just 19 percent of respondents there report improvements in the world economy, down from 59 percent who said the same three months ago.
Despite their relative positivity, respondents also believe a recession seems increasingly likely (Exhibit 2). When we asked last quarter about four scenarios for the world economy in 2024–25,3 38 percent of respondents chose one of two recession scenarios as the most likely to occur. Now, more than half rank a recession scenario as most likely. The largest share of all respondents, 45 percent—up from 29 percent in March—cite a demand-led recession, where rising uncertainty causes consumer sentiment to plummet. Across the regions surveyed, a demand-led recession is the prevailing view in both Europe and India. Respondents cite a scenario of high inflation and slowing growth second-most often, which those in Greater China and North America rank as the most likely one.
When asked about the risks to global growth, respondents continue to most often cite geopolitical instability (the most-cited risk since March 2022) and transitions of political leadership. At the same time, concerns over trade policy (cited by 24 percent, up from 14 to 18 percent throughout 2023) and inflation appear to be on the rise (Exhibit 3). Changes in trade policy and relationships are especially top of mind in Greater China, where 35 percent of respondents say trade-related developments are a threat to growth. Along with inflation, trade policy changes are the top risk in the region.4
In respondents’ countries, the focus on unemployment grows, while sentiment stays largely positive
Compared with the recent past, respondents in several economies are more likely to expect a rise in unemployment. Globally, 41 percent predict their countries’ unemployment rates will increase in the next six months, equal to the share who expect rates to hold steady—up from 34 percent and 37 percent, respectively, in the past two quarters. Respondents in Greater China are the likeliest to say so, though we also see fast-growing concerns elsewhere in the world (Exhibit 4). Most notable is the change in Asia–Pacific, where 40 percent of respondents anticipate a rise in unemployment—nearly twice the share that said so in March.
Respondents’ concern over unemployment as a threat to overall country growth is not especially acute compared with other risks; just 11 percent of respondents identify it as a risk. But this marks the largest share of respondents to cite unemployment since July 2021.5
The top four threats to domestic growth are the same as in March, though weak demand edged out high levels of national debt as the fifth-most-cited risk. Among them, the most significant risks vary greatly by region (Exhibit 5). Geopolitical instability is cited most often in Europe, domestic political conflicts most often in India, and weak demand most often in Asia–Pacific, where respondents are twice as likely as the global average to choose it. And while interest rate concerns began to ebb in December 2023, respondents in some regions are now more likely to expect an increase. In Greater China and in developing markets, 46 percent and 35 percent of respondents, respectively, believe their countries’ interest rates will rise in the next six months. In the previous survey, 39 percent in Greater China and 19 percent in developing markets said the same.
Still, respondents remain generally more positive than negative about their own economies, as they have been for the past 12 months. Forty-four percent say economic conditions in their countries have improved, while another 27 percent say conditions have worsened.
Looking ahead to the next six months, respondents are twice as likely to believe that domestic conditions will improve than that they will worsen—and it’s a smaller share (48 percent) than said so in March. Respondents in developing markets are notably more optimistic about the future than about present conditions in their countries. Respondents in Europe and North America, however, report a slightly less enthusiastic view of the future than of current conditions.
The company outlook remains cautiously optimistic
As we saw in the March survey, private sector respondents report largely positive expectations for their companies’ prospects—if not more modest ones, compared with 2023. Fifty-six percent believe their companies’ profits will increase in the next six months, though that’s down from 61 percent in March and 60 percent in December 2023. It’s also the smallest share to say so in nearly two years.
Likewise, the 49 percent who expect demand for their companies’ offerings to grow is the smallest share since July 2020, down from 57 percent six months ago. And as we saw in the past two quarters, respondents most often expect that the size of their companies’ workforce will stay the same in the near term. Forty-three percent say so, followed by one-third who expect their companies’ head counts to grow.
We also asked respondents about potential investment opportunities: namely, which markets present the best opportunities for their companies’ growth in the next year. Among respondents who provided an answer, the United States is the most-cited location (by 35 percent), followed by China and India (13 percent each), and Germany and Singapore (7 percent each).
ABOUT THE AUTHORS
Sven Smit is the chair of the McKinsey Global Institute, the chair of McKinsey insights and ecosystems, and a senior partner in McKinsey’s Amsterdam office; Jeffrey Condon is a senior knowledge expert in the Atlanta office; and Krzysztof Kwiatkowski is a capabilities and insights expert in the Boston office.
This article was edited by Daniella Seiler, an executive editor in the Washington, DC, office.
Economic conditions outlook, March 2024
Survey responses show increased confidence in the economy—globally and at home. Geopolitical concerns persist, and respondents increasingly view political transitions and policy changes as pressing risks.
Executives’ latest views on the global economy and their countries’ economies lean much more positive than they did at the end of 2023.
In the latest McKinsey Global Survey on economic conditions, the outlook on domestic conditions in most regions has become more hopeful, despite ongoing shared concerns about geopolitical instability and conflicts. In a year brimming with national elections, respondents increasingly see transitions of political leadership as a primary hazard to the global economy, particularly in Asia–Pacific, Europe, and North America.
Furthermore, respondents now view policy and regulatory changes as a top threat to their companies’ performance, and they offer more muted optimism than in December about their companies’ prospects.
Optimism builds over global and domestic conditions
Respondents share much brighter assessments of the global economy and conditions in their countries than they did at the end of 2023, and views of the global economy are the most positive they’ve been since March 2022 (Exhibit 1). In the December survey, respondents were equally likely to say the global economy had improved and worsened. Today, respondents are twice as likely to report improving rather than deteriorating conditions. Looking ahead to the next six months, respondents are also more optimistic than they were last quarter. Forty-six percent expect the global economy to improve—nearly double the share expecting worsening conditions—while 37 percent expected improvement in the previous survey.
Likewise, respondents offer hopeful views when asked about the most likely near-term scenario for the global economy, suggesting confidence in central banks. They are more likely to expect a soft landing overall—with either slowing or accelerating growth compared with 2023—than a recession (Exhibit 2). The largest share of respondents expect a soft landing, with slowing growth relative to 2023.
Respondents’ views on their own economies have also become more upbeat. Nearly half of respondents say economic conditions at home are better now than they were six months ago, up from 41 percent in December, while just 22 percent say conditions have gotten worse. Respondents in Europe—who offered the most negative assessments of any respondents in September and December—are now nearly twice as likely as in December to say conditions have improved in the past six months, though it is unclear what has prompted that change and whether it is a durable finding.
More than half of respondents expect their economies to improve over the next six months. It’s the first time in two years that a majority of respondents have said that. In most regions, larger shares of respondents express optimism about economic conditions at home now than in December (Exhibit 3).
Geopolitical instability remains top of mind as concerns over political transitions rise
Geopolitical instability and conflict continues to be the most cited risk to global growth, selected by two-thirds of respondents for the second quarter in a row (Exhibit 4). Yet in this first quarterly survey of 2024—a year in which more than 60 countries will hold national elections—transitions of political leadership have jumped from the fifth-most-cited to the second-most-cited threat to the world economy. The share of respondents in Europe reporting political transitions as a top threat is 2.4 times the share in December, while the shares in North America and Asia–Pacific have nearly doubled. We see a smaller uptick in concern about supply chain disruptions, which is cited as a threat by the largest share of respondents since December 2022.
Looking at risks to growth in respondents’ countries, geopolitical instability and conflict remains the top perceived threat, cited by a larger share than in any quarter since March 2022. Uneasiness about domestic political conflicts and transitions of political leadership, now the second- and third-most-cited risks, have overtaken concerns about inflation, which was the second-most-cited risk in December. Among respondents in North America, transitions of political leadership are cited nearly twice as often as in December (Exhibit 5). In Greater China, multiple risks now appear to carry equal weight, whereas in December, inflation was the top concern.
Policy and regulatory changes top the list of cited threats to companies’ growth
As respondents’ concerns about inflation as a domestic threat wane, the survey results suggest that companies are holding off on price increases. For the first time since we began asking about companies’ prices in September 2022, less than half of private-sector respondents in the latest survey—45 percent—say their companies increased the price of their goods or services over the past six months, down from 56 percent in December.
For five quarters, respondents’ most cited risk to their companies’ performance in the next 12 months was weak customer demand. Now, they most often point to policy and regulatory changes as a threat. In December 2023, policy and regulatory changes weren’t even one of the top five perceived risks. This increased wariness of policy changes cuts across most regions, though we see the largest increase in Europe.
Even though weak demand is no longer the most cited risk for companies, optimism over expected demand has tapered since December. Fifty-one percent of respondents expect an increase in customer demand over the next six months, down from 57 percent in December. Yet expectations about profits remain upbeat: about six in ten respondents expect increasing profits in the months ahead, in line with expectations in much of 2023.
ABOUT THE AUTHORS
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 in the Boston office; 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 Jan Mischke for his contributions to this work.
This article was edited by Heather Hanselman, a senior editor in the Atlanta office.
