Tom Branna, Editorial Director04.18.21
There's good news and bad news as business adapts to a new normal more than a year after coronavirus wreaked havoc on the world's health. Home offices, Zoom instead of business travel, e-commerce—all of these trends are the pandemic-related changes most likely to stick even as the world emerges from the COVID-19 pandemic, according to the latest McKinsey Global Survey. Supply-chain management, surprisingly, is most likely to revert to precrisis norms.
In a recent survey of business executives, 53% say economic conditions in their home countries have improved in the past six months—the first time a majority has said so in three years. Their outlook on the economy’s future is even more positive, with an all-time record share of respondents predicting improvements in their countries’ economies over the next six months. As expectations brighten, the newest results also offer some clues on what the recovery could look like—or, at least, suggest that most companies will return to full operations later in 2021. At the companies that are fully operational now, executives say their ways of working have already changed in many respects and that these changes seem to have stuck. Still, weak demand continues to threaten corporate growth, and the pandemic remains the biggest risk to overall economic growth, both global and domestic.
Executives’ good feelings about the economy continue to grow, according to McKinsey's latest survey. Half of all respondents believe that current conditions in the global economy are better now than they were six months ago (up from 43% in the previous quarter), and 53% say the same of conditions in their home countries—the first time a majority has said so since March 2018.
By region, executives in India and in Greater China remain the most positive about recent developments in their home economies—and those in Europe, the least so—which was also the case in December 2020. The biggest improvement is in North America, where 59% of respondents now report better conditions at home, versus 39% in December. By contrast, their peers in Latin America are much likelier to report economic declines than they were previously, according to McKinsey.
Expectations for the future are even more upbeat. While the global outlook has wavered in recent months, respondents are more optimistic now about the world economy’s prospects than they’ve been at any other point during the crisis: 69% said global economic conditions will improve, up from 56% in the previous survey. When asked about their countries’ economies, nearly three-quarters of executives expect improved conditions in the next six months, up from 56% in January—the highest share to say so since the pandemic began and since McKinsey began asking the question, in February 2004.
Unemployment concerns also seem to be subsiding, compared with the past few months when pluralities or outright majorities of respondents predicted an increasing unemployment rate at home. Now, 43% expect a decline while 38% expect an increase, though there are notable differences by region. A majority of respondents in Europe still anticipate rising unemployment (which was true in the past two surveys), while those in North America are the most likely of their peers to expect a decrease in unemployment: 69% say so, while only 16% in the region predict an increase, according to McKinsey.
At the company level, positive expectations are also hitting new highs. Sixty-three percent of executives believe that demand for their companies’ products and services will increase in the months ahead, versus 39% who said the same one year ago, while 65% expect their companies’ profits will increase—the largest share to say so in three years. Workforce expectations remain stable, with a plurality of respondents saying their head counts will stay the same as they have throughout the pandemic. Thirty-seven percent, however, expect their workforce size to increase—the largest share to say so since before the pandemic.
Economic Improvement
In a recent survey of business executives, 53% say economic conditions in their home countries have improved in the past six months—the first time a majority has said so in three years. Their outlook on the economy’s future is even more positive, with an all-time record share of respondents predicting improvements in their countries’ economies over the next six months. As expectations brighten, the newest results also offer some clues on what the recovery could look like—or, at least, suggest that most companies will return to full operations later in 2021. At the companies that are fully operational now, executives say their ways of working have already changed in many respects and that these changes seem to have stuck. Still, weak demand continues to threaten corporate growth, and the pandemic remains the biggest risk to overall economic growth, both global and domestic.
Executives’ good feelings about the economy continue to grow, according to McKinsey's latest survey. Half of all respondents believe that current conditions in the global economy are better now than they were six months ago (up from 43% in the previous quarter), and 53% say the same of conditions in their home countries—the first time a majority has said so since March 2018.
Most Optimism in India & China
By region, executives in India and in Greater China remain the most positive about recent developments in their home economies—and those in Europe, the least so—which was also the case in December 2020. The biggest improvement is in North America, where 59% of respondents now report better conditions at home, versus 39% in December. By contrast, their peers in Latin America are much likelier to report economic declines than they were previously, according to McKinsey.
Expectations for the future are even more upbeat. While the global outlook has wavered in recent months, respondents are more optimistic now about the world economy’s prospects than they’ve been at any other point during the crisis: 69% said global economic conditions will improve, up from 56% in the previous survey. When asked about their countries’ economies, nearly three-quarters of executives expect improved conditions in the next six months, up from 56% in January—the highest share to say so since the pandemic began and since McKinsey began asking the question, in February 2004.
Unemployment Stabilizes
Unemployment concerns also seem to be subsiding, compared with the past few months when pluralities or outright majorities of respondents predicted an increasing unemployment rate at home. Now, 43% expect a decline while 38% expect an increase, though there are notable differences by region. A majority of respondents in Europe still anticipate rising unemployment (which was true in the past two surveys), while those in North America are the most likely of their peers to expect a decrease in unemployment: 69% say so, while only 16% in the region predict an increase, according to McKinsey.
Positive Business Expectations
At the company level, positive expectations are also hitting new highs. Sixty-three percent of executives believe that demand for their companies’ products and services will increase in the months ahead, versus 39% who said the same one year ago, while 65% expect their companies’ profits will increase—the largest share to say so in three years. Workforce expectations remain stable, with a plurality of respondents saying their head counts will stay the same as they have throughout the pandemic. Thirty-seven percent, however, expect their workforce size to increase—the largest share to say so since before the pandemic.