Global Economics Intelligence executive summary, March 2024

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Global Economics Intelligence executive summary, March 2024

By Jeffrey Condon et al., | McKinsey & Company | April 22, 2024

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A rosier picture is painted by the latest McKinsey Global Survey on economic conditions.   Respondents have increased confidence in the economy—both globally and at home. Notably, respondents share much brighter assessments of both the global economy and conditions in their own countries than they did at the end of 2023. Views of the global economy are the most positive they’ve been since March 2022 and, in the majority of regions, respondents also have a more hopeful outlook on domestic conditions despite enduring concerns over geopolitical instability and conflict.

However, in a year packed with national elections, executives are concerned about political uncertainty—increasingly viewing transitions of political leadership as a primary hazard to the global economy, particularly in Asia–Pacific, Europe, and North America. They view policy and regulatory changes as a top threat to their companies’ performance, and they offer more muted optimism than in December about their companies’ prospects.

Consumer inflation eased to around 2–3% among advanced economies and producer prices remain subdued. In the emerging economies, inflation remains under control despite increasing inflationary pressures.

It’s a mixed picture for commodities: precious metals and livestock are surging, with gold growing steadily into March, while agricultural prices are declining and other commodities are generally stable. A recent uptick in oil prices can be attributed to reduced stocks, while other energy-related commodity prices are trending down. The cost of food around the world continues to ease but remains close to 20% above prepandemic levels.

Interest rates were once again largely unchanged, with Brazil being the exception. On March 20, the Central Bank’s Monetary Policy Committee decided to cut the Selic rate by another half a percentage point, to 10.75%.

In terms of GDP, Europe is underperforming compared with many areas. In Russia, monthly indicators for January suggest that growth in economic activity has slowed. Meanwhile, India’s real GDP growth surged to a six-quarter high of 8.4% in the third quarter of the 2023–24 fiscal year, while China’s government has set a GDP growth target of around 5.0% for 2024.

The global purchasing managers’ index (PMI) is seeing manufacturing growth return in many places, while services are gaining momentum.  Unemployment has been growing moderately in recent months. The all-India unemployment rate was 8% in February, up by 1.2 percentage points on the previous month. In Brazil, the three-month moving average unemployment rate slightly rose to 7.6% in January up for the first time in 12 months. Meanwhile, China’s overall surveyed urban unemployment rate has increased for three months in a row, to 5.3% in February.  The US saw February’s unemployment rate rise to a two-year high of 3.9%. The UK unemployment rate was estimated at 3.9% in the period from November 2023 to January 2024. Russia’s situation is somewhat different, with unemployment at an all-time low for the post-Soviet era (3% in December 2023).

Most equities indexes showed gains for investors in February and March, with China an exception.

World trade has been slowing, though US exports were $0.3 billion up from December, at $257.2 billion; January imports were $324.6 billion, $3.6 billion above December’s imports.  In China, cross-border trade slowed in February. Exports growth decelerated to 5.6% in February (8.2% in January) and imports growth fell to −8.2% in February (15.4% in January). In February, Brazil’s balance of trade registered a surplus of $5.4 billion, with exports totaling $23.5 billion ($26.9 billion in January) and imports reaching $18.1 billion ($20.5 billion in January). Among surveyed economies, the standout is India, which saw merchandise exports reach $41.4 billion in February 2024 (an 11-month high) to register 11.9% year-over-year growth.  In some ways, it’s business as usual for Russia.

2 key takeaways from the article

1. A rosier picture is painted by the latest McKinsey Global Survey on economic conditions.   Respondents have increased confidence in the economy—both globally and at home. Notably, respondents share much brighter assessments of both the global economy and conditions in their own countries than they did at the end of 2023. Views of the global economy are the most positive they’ve been since March 2022 and, in the majority of regions, respondents also have a more hopeful outlook on domestic conditions despite enduring concerns over geopolitical instability and conflict.
2. A year packed with national elections, executives are concerned about political uncertainty—increasingly viewing transitions of political leadership as a primary hazard to the global economy, particularly in Asia–Pacific, Europe, and North America. They view policy and regulatory changes as a top threat to their companies’ performance, and they offer more muted optimism than in December about their companies’ prospects.

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Topics:  Global Economy, Inflation, Commodity Prices, Emerging Economies, Consumer