The latest McKinsey Quarterly survey of some 5,500 senior corporate leaders around the world shows that executives from a wide range of industries and regions remain broadly positive about the global economy. These executives have curbed their optimism since early this year, but many plan to step up hiring as well as spending on information technology. The most vigorously upbeat sentiment comes from India, where executives voice strong confidence in the new government's ability to advance economic liberalization, and from a rapidly expanding China, which is confident that it will continue to attract massive foreign direct investment (Exhibit 1).
Nonetheless, during a period when oil prices and fears of interest rate hikes rose, executives curbed their earlier enthusiasm about their own economies and industries. Overall, confidence levels have declined by 6 percent since the Quarterly's first survey, in January. The most dramatic decrease came in developing markets.
Many executives also feel ongoing pressure on prices—a sign that competition remains heated. And though the promise of India and China continues to dazzle, not all business leaders believe that those countries can sustain their economic reforms. (For information about the survey respondents and on the use of the data, see sidebar "The McKinsey Global Confidence Index.")
The survey's regional data provide some of the most intriguing insights into the thinking of business executives. In January, for example, those in emerging markets were the most optimistic participants in the survey, but since then their confidence has fallen three times as far as that of their counterparts elsewhere—to a level below the global average. Although the confidence of executives in India and China declined, it remains so high in these two prime destinations for outsourcing and foreign investment as to buoy sentiment in the developing countries as a whole (Exhibit 2).
Concern over the near term is greatest among executives in the developed Asia-Pacific economies: Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea, and Taiwan. Only 48 percent of the region's executives expect conditions in either their national economies or their industries to improve in the next six months. In contrast, European executives are much more enthusiastic about the prospects for their industries—no matter which one they work in—than for their national economies: only 51 percent of them expect even a moderate improvement in the latter, but 62 percent feel confident about the former.
A particular bright spot everywhere turned out to be information technology, where investment apparently is on the rise. Half of all chief information officers (CIOs) and chief technology officers (CTOs) who responded to the survey and nearly 40 percent of all other executives indicate that their companies are planning an increase in IT spending over the next six months. Indeed, nearly a third of both groups of respondents say that their companies intend to raise spending on technology by 11 to 25 percent.
Despite these encouraging signs, executives don't see much leeway to raise prices. Around the world, most of the respondents say that their companies don't plan any price change, and 9 percent actually report plans to cut their prices. Even among the 26 percent of survey respondents who say that their companies will increase prices, most plan to do so only moderately (Exhibit 3).
Yet the survey provides hope for job seekers: after years of declining employment, 43 percent of the respondents say that their companies will start recruiting. Small businesses, however, are far more confident about adding to their payrolls than larger ones are(Exhibit 4, part 1). While Chinese and Indian companies plan to do much of the hiring, nearly half of the North American1 executives say that their companies intend to take on additional employees—11 to 25 percent more, according to 19 percent of them (Exhibit 4, part 2).
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