Optimism among executives around the world about the current economic conditions at both the global and national levels has seen an improvement in the first quarter of this year, but there is an underlying cautiousness, a report by consulting firm McKinsey & Co says.
According to McKinsey for the first time since June 2011, executives are more optimistic than pessimistic about their national economies. The percentage of respondents saying economic conditions in their countries are better now than six months ago has more than doubled since December, 2011.
As many as 42% say conditions are better now compared with six months ago. About 48% expect better conditions six months from now— up from 26% in December.
Sixty-five% of executives in India, the largest share, expect their economy to improve, while 59% in North America and 49% in developed Asia feel the same.
Interestingly, even in the euro-zone, an even larger share expect their economies will be better in six months.
The report said "the recent optimism may still be tenuous" as executives expect uncertainty in certain other areas.
Around 58% say oil prices will be higher in six months) while 31% of the respondents cited geopolitical instability as a barrier to growth.
Besides, while executives are more positive than not on the future of the economy as a whole, their companies are not more ready to make major strategic decisions than they were in December. Or, perhaps they lack confidence that conditions will improve substantively, the report said.
About 30% say their companies are postponing or deciding not to pursue capital investments they would typically consider good for growth.
About 24% say their companies are postponing M&A decisions they would consider good for growth.
Executives report smaller changes with respect to their companies' hiring and investment decisions: they are still likeliest to say their workforce size will stay the same in the next six months, and slightly smaller share say their companies are postponing capital investment decisions.
Forty-eight per cent say they expect the size of their companies' workforce to stay the same, 32% expect an increase, and 18% expect a decrease.
The online survey was carried out from March 5 to 9, 2012, and took into consideration responses from 2,060 executives.