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.
McKinsey’s original survey research
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
Would you like to learn more about the McKinsey Global Institute?
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,6 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.
Would you like to learn more about our Strategy & Corporate Finance Practice?
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,7 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,8 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,9 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 elections10—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.11 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.
