TODAY’S NEWS. TOMORROW’S INSIGHTS.A daily newsletter from McKinsey & Company
Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities
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Productivity slump. In the US, manufacturing output per hour has increased by just 0.2% a year since 2009. Germany, South Korea, France, and Italy far outpaced this figure, but in none of these countries did manufacturing productivity grow by even 1.5% a year. Meanwhile, there was no growth in Japan. Overseas factories have for decades produced clothing, furniture, and other labor-intensive products for US companies. But advanced items such as batteries for electric cars, commercial aircraft gear, and semiconductors are increasingly being made abroad, too. [WSJ]
The dismal science. At a recent meeting, top global economists traded gloomy views of global growth, citing concerns including low productivity, a lack of geopolitical stability, and record government debt. One economist suggested that a global growth rate above 4% may be in the past, a relic of a period during which China’s rapid growth drove higher global output. Annual growth of 3% may be the new reality, which could create difficult situations for less developed economies with growing populations. [Reuters]
The road less traveled. Is it possible for the world to return to an era of productive growth? McKinsey Global Institute (MGI) director Olivia White, McKinsey senior partner Michael Birshan, and their coauthor explored four plausible scenarios for the global economy’s next path. Three scenarios offer an unfavorable mix of inequality, high inflation, and asset corrections. But a return to productive growth would help lower inflation, enable technology deployment and new investment to accelerate, and allow GDP growth to outpace growth in the value of the world’s assets.
Time for a change. The past 20 years have been very kind to the global balance sheet—the tally of the world’s assets and liabilities. Between 2000 and 2021, paper wealth surged by $160 trillion as asset prices expanded on the back of low interest rates. The price of all this wealth was low productivity growth among G-7 economies and secular stagnation. Take a deep dive into how the global balance sheet and productivity got out of whack, how the framework might be righted, and how businesses can prepare for whatever outcome prevails.
— Edited by Katy McLaughlin, senior editor, Southern California
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