Economic conditions outlook, December 2024

Following a year of political elections in numerous countries, including the US presidential election in November, surveyed executives have turned their attention toward changes in trade policy and relationships and other potential policy changes. In the latest McKinsey Global Survey on economic conditions, potential trade policy changes rival geopolitical instability—the most-cited disruption to the global economy throughout 2024—as elements that respondents expect will affect the global economy in 2025.  Transitions of political leadership remain on respondents’ minds, while respondents increasingly anticipate higher unemployment in their countries and are more inclined than in previous quarters to expect interest rates to increase.

Overall, respondents’ views on the current state of the global economy and their countries’ economies are more cautious than they were in early 2024 but are consistent with last quarter. Respondents continue to be more likely to expect improvement in the months ahead than worsening conditions.

For the past three years, survey respondents’ concerns about geopolitical instability and conflicts have overshadowed all other potential disruptions to the global economy. The survey asks about the biggest risks to global and domestic growth, and these concerns have also been the most-cited risk to respondents’ home economies since last December. While respondents to the latest survey continue to see geopolitics as a primary disruptive force, they are now nearly as likely to expect changes in trade policy and relationships to affect global growth over the next six months. The share of respondents citing changes in trade policy or relationships as a top risk to the global economy has more than doubled since the previous survey.  The share of respondents pointing to the potential disruptive effects of trade policy changes more than doubled among respondents in Asia–Pacific, Europe, North America, and other developing markets since September.

Private sector respondents now see changes in the trade environment as one of the greatest potential disruptions to their companies’ performance over the next year.  Changes to trade policies are one of the top five most-cited topics for the first time since September 2019. Policy and regulatory changes are also more top of mind now than they were in the previous quarter. 

Respondents’ current sentiments about the state of the global economy remain in line with those they expressed in the previous quarter, although the findings suggest growing uncertainty about interest rates and unemployment rates. Respondents continue to be equally likely to report improving or worsening conditions in the global economy.  Looking ahead to the next six months, respondents continue to be more likely to expect improving than worsening conditions.

Overall, respondents’ assessments of their countries’ economies also are consistent with the previous quarter’s but have tempered since early 2024. About four in ten say their economies have improved, as was true in September. But one-third report declining conditions, up from 22 percent who said so in March 2024.

With respect to interest rates, only respondents in Europe and North America are more likely to predict rate decreases than increases.  Respondents are much more likely now than they were in the first quarter of 2024 to predict increasing unemployment rates in their countries.