The coronavirus effect on global economic sentiment

The survey content and analysis were developed by Alan FitzGerald, a director of client capabilities in McKinsey’s New York office; Vivien Singer, a knowledge expert at the Waltham Client Capability Hub; and Sven Smit, a cochair and director of the McKinsey Global Institute and a senior partner in the Amsterdam office.

This article was edited by Heather Hanselman, an associate editor in the Atlanta office, and Daniella Seiler, an editor in the New York office.

In North America and developing markets, respondents’ economic outlook is less favorable than in June. Across regions, views are more uncertain on COVID-19 recovery but more hopeful on company prospects.

Nations around the world are struggling to contain the COVID-19 pandemic and its economic impact, and responses to our latest McKinsey Global Survey on the economy highlight the magnitude of the challenge—especially in certain geographies. 1 In North America and in developing markets, executives have become less hopeful since early June about their countries’ economies and more cautious than others in their views on potential scenarios for COVID-19 recovery. Overall expectations on these scenarios also suggest growing caution and uncertainty. Even so, respondents’ outlook for their own companies continues to brighten. For the first time in 2020, respondents are more likely to expect their companies’ profits to increase than decrease in the months ahead.

On the whole, executives maintain the more positive than negative outlook they reported in June, for both the world economy and their home countries, 2 and they are less likely than in previous months to expect declining growth rates globally and at home (Exhibit 1). While respondents’ outlooks about their countries’ economies have improved in most regions over the past four surveys, responses in North America and developing markets have taken a negative turn since June (Exhibit 2). 3 What’s more, when asked about COVID-19’s effects on domestic GDP, respondents in North America and developing markets are much less likely than last month to select one of the more optimistic options out of nine scenarios. 4

Across all geographies, views on the COVID-19 recovery have also become less favorable. In June, the optimistic A3 scenario (in which the virus is contained and growth returns slowly to precrisis levels) and A1 scenario (in which public-health and economic-policy interventions are partially effective, and the return to precrisis levels of GDP, income, and corporate earnings will take time) were selected most often as outcomes for respondents’ home economies. Now, the largest share of respondents rank A1 as the likeliest outcome for their own countries in the next year, followed by B2, in which public-health interventions are effective but do not prevent virus reoccurrences, and economic-policy interventions are insufficient to deliver a full recovery to precrisis levels (Exhibit 3). Similarly, when asked about these scenarios at the global level, respondents most often choose A1, as they have since April, and B2 has replaced the more optimistic A3 as the second most cited scenario for the world economy.

Respondents are more upbeat when considering their companies’ prospects over the next six months. In each survey since April, a growing share of respondents have expected their companies’ profits to increase (Exhibit 4). For the first time in 2020, respondents are now more likely to predict an increase than a decrease. 5 Furthermore, the share of respondents who say they expect customer demand for their companies’ products or services to weaken in the months ahead has continually decreased since April.

By industry, respondents in automotive and assembly; healthcare services, pharma, and medical products; and travel, transport, and logistics—all sectors hit especially hard by the pandemic’s knock-on effects—are much more likely now than in June to expect demand for their companies’ products or services to increase in the months ahead (Exhibit 5). In contrast, respondents in retail, one of the most optimistic segments in the June survey, have become much more downbeat.

June 2020

In our latest survey on the economy, executives’ overall outlook for the future continues to improve.

As the world grapples with the COVID-19 pandemic that continues to affect a growing number of countries and people, 6 the responses to the latest McKinsey Global Survey on the economy suggest increasing optimism. 7 Executives report ever-more-positive expectations for company demand and profitability—two months after reporting record pessimism on both fronts—and for their countries’ economic prospects.

While executives’ views on company profits remain more negative than positive, the share expecting increased profitability has grown. Respondents are more likely to expect customer demand will increase than decrease; two months ago, the opposite was true.

By industry, more than half of respondents in retail and in high tech and telecom expect demand to rise. Retail executives also report a much more optimistic view on demand since the April 2020 survey, as do those in capital projects and infrastructure.

When asked about the economy’s future, respondents are cautiously but increasingly optimistic. Fifty-one percent say the world economy will be better six months from now, a share that has grown throughout 2020. Similarly, one-half of respondents expect conditions in their home economies to improve; in May, 43 percent said so, up from 36 percent in April and 26 percent in March. Except in Greater China, India, and Latin America—where respondents’ outlooks have held steady—executives in every region are more likely than in May to expect improvements.

What’s more, the share of respondents expecting global and domestic growth rates to increase in the next six months has grown since April and May.

For more detail on the survey’s results, please see the exhibits below and our longer article, “Economic Conditions Snapshot, June 2020: McKinsey Global Survey results.”

May 2020

Economic sentiment has improved since last month, per our latest survey of global executives on COVID-19 and the economy. Still, their near-term outlook remains more negative than positive.

Since early April, a growing number of businesses and governments around the world have begun to reopen, ushering in a new—if tenuous—phase of the coronavirus situation. Likewise, the results from our latest McKinsey Global Survey on the economy (conducted from May 4 to May 8, 2020) point to an improving outlook. 8 Executives are much likelier now than in April or March to expect improving conditions and increased growth rates in the months ahead.

Yet executives are still more negative than positive in their expectations for their home economies and the world economy at large, as they were one month ago. And as the results show, the path to a next normal looks very different across regions and industries. Executives in Greater China 9 were the most optimistic about domestic economic conditions in April and remain so this month: 75 percent expect conditions to improve in the next six months, up from 63 percent previously. Half of that share—just 34 percent—say the same in Europe. But even respondents there are notably more positive about their economies than they were one month ago. Among all regions, respondents in India report the largest shift toward positive sentiment since last month.

At the company level, respondents most often cite weak consumer demand as a threat to their organizations’ growth. But other risks loom large in certain sectors. Respondents in financial services, for example, cite volatile financial markets as the biggest threat to company growth. And according to respondents, supply-chain disruptions present an outsize risk in several industries—namely, pharma, chemicals, consumer and packaged goods, and automotive and assembly. What’s more, when we asked respondents in industrial and manufacturing sectors about value-chain disruptions resulting from the coronavirus, 10 only 15 percent say COVID-19 has not caused a material disruption to their value chains, and another one-third say the current disruption is the worst their companies have ever experienced.

For more detail on the survey’s results, please see the exhibits below.

April 2020

In our latest survey, global executives report a gloomier outlook than one month ago. Two-thirds expect a sizable contraction in the world economy, and a record share predict declining company profits.

As the COVID-19 pandemic spreads quickly across and within geographies, executives share growing concerns about its economic impact—and, varying by region, dramatic shifts in their views since the beginning of March. 11 Responses to our latest McKinsey Global Survey on the economy, 12 conducted from April 6 to April 10, show that overall sentiment is more negative than it was just one month ago: for example, two-thirds of respondents expect a moderate or significant contraction in the world economy’s growth rate—that is, a recession or a depression. In early March, only 42 percent said the same. And 56 percent say the same thing about growth in their home economies, up from 24 % one month ago.

Respondents’ overall outlook for their home countries and the global economy has changed less in the past month, though their views remain decidedly downbeat. At least six in ten believe that conditions in their home economies and in the global economy will worsen in the coming months. At the company level, prospects are especially grim. Respondents are nearly twice as likely as they were one month ago to say that the profits of their companies will decrease in the next few months; at 61 percent, that is the largest share to report a negative outlook on profits since we began asking the question, in the wake of the 2008 financial crisis. 13

Even so, the results point to some bright spots. When asked about nine scenarios for the pandemic’s impact on GDP, a majority of respondents say the four more positive scenarios are most likely to play out in the next year (exhibit). 14