Confidence in the economy is on the upswing among corporate executives.
More of them currently think global economic conditions are improving than had been the case at any time in the past two years, according to McKinsey’s latest quarterly survey.
Almost half (45%) of 957 executives, surveyed in March, said conditions were better than they had been six months earlier. That was twice as many as those who said the economic climate had deteriorated.
Those figures represented marked improvements from a few months earlier. In McKinsey’s immediately prior survey, conducted in December, just 35% of respondents said conditions had improved recently, the same proportion who thought the economy had declined.
Looking ahead, 46% of those surveyed expected economic conditions to improve over the following six months, compared with 37% who said so in the December survey.
However, while almost two-thirds (63%) of respondents predicted a “soft landing” for the economy through next year, a majority of them predicted that growth nonetheless would slow compared with 2023. Further, a troubling minority (38%) still are anticipating a recession, most of them citing expectations for lower consumer spending due to economic and geopolitical uncertainty.
Indeed, weak demand was among the greatest current concerns for corporate executives. Just over half (51%) of executives predicted demand would increase in the next six months, down from 57% who said so in December. In just three months, the sector transformed from the most upbeat to the least.
Expectations for near-future demand plummeted in the technology/media/telecom segment. Whereas in December two-thirds of executives expected demand for their companies’ products and/or services would grow over the next six months, by March fewer than 40% thought so.
Other sectors expecting significant (if less drastic) demand weakness included financial services and energy/materials.
Still, expectations for profits remain sunny, with about 6 in 10 survey participants expecting better bottom lines in the months ahead. Again, though, respondents in financial services were least likely to say profits will increase.
Meanwhile, for the first time since McKinsey started asking about companies’ pricing in its September 2022 survey, less than half (45%) of private-sector respondents said their companies had raised prices in the prior six months. That was down from 56% in the December 2023 survey.
The survey also documented a sudden shift in expectations for workforce size over the next six months.
In most quarters, according to McKinsey, such expectations vary dramatically across industries. For example, in the December survey, respondents working in business, legal, and professional services were about twice as likely as those in financial services to expect the number of employees to increase.
Now, though, respondents are much more aligned, with approximately a 10-percentage-point spread between the most and least optimistic industries, McKinsey wrote in its survey report.