McKinsey Global Survey results:

Economic Conditions Snapshot,

November 2009
Executives’ optimism about the economy continues to climb, especially in emerging markets and in
developed economies in Asia. Executives are a little less sure about their companies’ prospects and
say low consumer demand is the biggest barrier to growth.

For the first time in a year, a majority of respondents—51 percent—say economic conditions
in their countries are better now than they were in September 2008, according to a survey
in the field during the last week of October, a volatile week for stock markets.1 A larger
share of executives also expects the good news to continue, with 47 percent expecting GDP
growth to return to pre–September 2008 levels in 2010 or 2011, compared with 40 percent
six weeks ago. Although the global news is good, there are marked regional differences;
executives in the developed countries of Asia2 are generally the most optimistic, and those
in Europe are the least.

However, a majority of executives around the world share the prevailing skepticism about
consumers: when asked to name the biggest threat to future economic growth and to
the growth of their own companies, more cite low consumer demand than anything else.
1 The online survey was in the field Ineffective government regulation is the next biggest economic concern, respondents
from October 27, 2009, to October indicate, followed by losing business to low-cost competitors.
30, 2009, and garnered 1,698
responses from executives
representing the full range of
Looking ahead, respondents’ views on company profits and workforce size haven’t
industries, regions, functional
specialties, and titles. meaningfully changed in the past six weeks. Pluralities still expect increased profits
2 Includes Australia, Hong Kong,

Japan, New Zealand, the

in 2009 and no change in their workforces through the first quarter of 2010. Here, too,
Philippines, Singapore, and Taiwan. however, there are notable regional differences.

Jean-François Martin
2 McKinsey Global Survey results Economic Conditions Snapshot, November 2009

Where economic optimism is highest

Although 51 percent of all respondents say economic conditions are better than they were
last September (Exhibit 1), only 19 percent say an upturn has begun. This figure rises to a
remarkable 33 percent, however, among respondents in Asia’s developed countries. And
about a quarter of those—more than in any other developed region—also say the best way
to describe the global economy through the end of the first quarter of 2010 is “regenerated
global momentum” (Exhibit 2).

Everywhere except Europe,

Survey 2009more executives describe the economy
over the next several monthsconditions
Economic November
as “battered but2009
resilient” than say it is frozen,
Exhibit 1 of 6
stalled, or regenerated.
Glance:
Exhibit title: Steady improvement
Exhibit 1
Steady improvement
% of respondents1 Substantially Moderately The same Moderately Substantially
worse worse better better

How are current economic conditions How do you expect your country’s
in your country compared with economy to be at the end of the first
conditions in early September 2008? quarter of 2010? 2
Oct 2009 1
11 22 16 45 6 10 25 57 7
n = 1,698
Survey
Sep 20092009
18 34 14 30 4 3 12 25 55 6
n = 1,677
Economic conditions November 2009
Exhibit 2 of 6
1 Figures may not sum to 100%, because of rounding.
2In September 2009, the question was asked in terms of expectations at the end of 2009.
Glance:
Exhibit title: More momentum in Asia
Exhibit 2
More momentum in Asia
% of respondents who ranked given scenario no. 1

By region

Total North India Developing China Asia-Pacific Europe

n = 1,659 America n = 146 markets1 n = 93 n = 185 n = 539
n = 541 n = 155
Battered but
39 46 42 38 37 37 32
resilient
Stalled
33 31 16 28 24 28 39
globalization
Regenerated
19 14 37 25 27 26 18
global momentum

Long freeze 10 9 4 8 13 8 11

1 Includes Latin America; excludes China and India.

3 McKinsey Global Survey results Economic Conditions Snapshot, November 2009

Respondents identify several potential stumbling blocks to economic growth, most often
low consumer demand (Exhibit 3). Other potential barriers to growth vary by whether
respondents expect their nations’ GDPs to increase or decrease. In countries where
executives
Survey 2009 expect an increase in GDP, more are also worried about currency values and
inflation; conditions
Economic in countries where executives
November 2009 expect a decrease, they are notably more concerned
about ineffective
Exhibit 3 of 6 regulation.
Glance:
Exhibit title: Threats to growth
Exhibit 3
Threats to growth
% of respondents,1 n = 1,698

Biggest barriers or risks to country’s economic growth over the next 12 months

Low consumer demand 59 Higher interest rates 15

Ineffective government Insufficient support

28 13
regulation from government
Low service-
Low manufacturing activity 28 11
sector activity

Currency values 27 Other 19

Low levels of innovation 23 No particular risk 1

Loss of business activity

20
to lower-cost countries

1 Respondents who answered “don’t know” are not shown.

4 McKinsey Global Survey results Economic Conditions Snapshot, November 2009

Status quo for companies

Executives’ hopes for their companies haven’t risen in tandem with their economic
expectations. Compared with six weeks ago, nearly identical shares expect increased profits
in 2009 (44 percent) and plan to maintain their workforces at their current sizes over the
next few months (46 percent).

However, there are significant differences in the profit expectations of executives in

different regions and industries (Exhibit 4). These are largely parallel to respondents’
economic expectations. For example, among respondents in developed economies, more in
Asia than
Survey 2009elsewhere foresee an increase in profits.
Economic conditions November 2009
Exhibit 4 of 6
Glance:
Exhibit title: Mixed expectations on profits
Exhibit 4
Mixed expectations on profits
% of respondents,1 n = 1,583

Expected change in profit by the end of 2009, compared with 2008

By industry

Total High tech/ Financial Professional Manufacturing

telecom services
Increase 44 52 49 42 37
No change 11 10 12 12 7

Decrease 41 32 36 43 52

By region

India China Asia-Pacific Developing North Europe

markets2 America
Increase 66 65 59 49 44 36
No change 6 8 4 8 12 13

Decrease 19 23 34 39 40 48

1 Respondents who answered “don’t know” are not shown; question was not asked of respondents in the public sector.
2Includes Latin America; excludes China and India.
5 McKinsey Global Survey results Economic Conditions Snapshot, November 2009

Looking ahead through the next 12 months, more than half of respondents expect
their companies to continue cutting costs (although this percentage is far lower than
the share
Survey 2009of companies that have already done so). Half of all respondents expect
their companies to focus
Economic conditions on productivity
November 2009 growth and the introduction of new products
or services—far
Exhibit 5 of 6 more than have done so over the past year. However, executives are
Glance:
Exhibit title: Worried about customer spending
Exhibit 5
Worried about customer spending
% of respondents,1 n = 1,583

By expected change in profits in 2009, compared with 2008

Biggest barriers or risks to company’s
growth over the next 12 months Total Increase No change Decrease

Low customer demand for our products or services 52 41 46 66

Loss of business to lower-cost competitors 34 32 33 36
Competition from new entrants to our sector 21 25 20 17
Low levels of innovation 19 20 9 21
Currency values 17 19 14 16
Ineffective government regulation 16 19 11 15
Inability to get needed funding 15 12 21 16
Consolidation in our sector 14 13 9 17
Insufficient support from government 8 10 8 8
Higher interest rates 8 10 6 8
Other 8 8 6 8
No particular barriers or risks 4 4 4 2

1 Respondents who answered “don’t know” are not shown; question was not asked of respondents in the public sector.

worried about customer spending: 52 percent cite low demand as the biggest barrier to
their companies’ growth, and a third fear losing business to lower-cost competitors
(Exhibit 5). Some concerns vary by profit expectations, but not as many as might be
expected. A low level of innovation, for example, is important to almost equal shares of
executives at companies expecting higher and lower profits.

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