Economic conditions Snapshot

The crisis—one year on: McKinsey.

A year after the global economic system nearly collapsed, many companies are finally finding ways to increase profits under the new economic conditions. But almost as many expect profits to continue falling, and executives also indicate that their broader economic hopes remain fragile. Many expect more government involvement in economies and industries over the long term. SEPTEMBER 2009

Some companies have moved beyond merely coping with the crisis and are once again actively planning for the long term, according to a survey in the field from September 7th to the 11th.1 Over the past 12 months, the respondents to our economic conditions surveys have told us that their companies are cutting costs, reducing capital investments and headcounts, and making plans for weeks or months, not years—all in all, hunkering down to survive the worst economic shock in decades. Now, for the first time in a year, more respondents expect their companies’ profits to rise than fall in the near term. Product development and long-term planning are high priorities for many companies, and most are optimistic about their prospects in the longer term.

Overall, the responses indicate that a “new normal” is settling in—for many companies, an environment less comfortable than the one they knew in the pre-crisis world. Most are still cutting costs, and a third of all respondents say that their companies are in crisis. What’s more, executives remain skeptical about the economic health of their countries; a majority say that governments should continue supporting economies in the near term.

In the longer run, many executives expect the globalization of financial and other markets to resume after slowing notably in 2009. They also foresee additional significant changes in their industries and economies over the next five years, including a stronger government role in both. Nearly three-quarters of the executives expect their companies to be in a stronger position in five years than they were before the crisis. The executives also think that their industries will be more consolidated and innovative—but will grow more slowly.

Read more: http://www.mckinseyquarterly.com/Economic_Studies/Productivity_Performance/The_crisis_one_year_on_McKinsey_Global_Economic_Conditions_Survey_results_2009_2437