McKinsey Survey Finds Economic Sentiment Rising

Posted by: Joe Weber on June 16

sunimage.jpg Executives around the world have grown more upbeat about current economic conditions in recent weeks, but only a minority expects an upturn this year, a McKinsey & Co. global survey shows. And, even as a rising number expects profits to grow this year, more expect to cut work forces than to hire.

The survey, an online effort that generated 1,404 responses from June 2-8, marked a sharp rise in sentiment, the consulting firm reports in the latest edition of The McKinsey Quarterly. The publication says, “Executives have become notably more optimistic about their companies’ and their countries’ economic prospects since mid-April – but the outlook was so poor then that optimism must be tempered.”

Surprisingly small shares of executives hold positive views, but in some cases those shares have grown sharply. Some 20% of those responding in June, for instance, suggested that current economic conditions in their countries were moderately or substantially better, up from just 9% in an April survey.

And the pessimists outnumber the optimists on the general economic outlook. Only 28% said they expect an economic upturn this year, while some 67% expect a decrease in gross domestic product in their countries.

Perhaps not surprisingly, American executives are more upbeat than their European counterparts. While some 20% of all the respondents suggested that current economic conditions are better than they were in September 2008, only 8% of those from Europe felt that way. This is consistent with other surveys, such as the Duke University/CFO Magazine Global Business Outlook Survey, which we reported on in this blog on June 3.

Indeed, North America is expected by many of the executives who responded to McKinsey as the place where a rebound will come first. Among the quarter of all respondents who expect an economic rebound in North America, 35% expect it to occur this year. McKinsey analysts say the relative optimism about North America has been clear since late last fall.

Overall, the Quarterly reports, executives are more optimistic about their companies’ prospects than they were in mid-April. Some 33% expect to see profits climb for the opening half of this year, up from 26% in the last survey. And while some 49% expect to see a decrease in profits, that’s down from 55% in the earlier poll.

As for jobs, only a modest number expect hiring. Some 19% expect an increase, up from 9% in the earlier survey. And some 37% expect a slide, down from 52%.



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BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.

See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.

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