Executives around the world are less optimistic about economic conditions than they were three months ago, according to the latest McKinsey survey.1 During a quarter marked by falling stock markets and global worries about inflation and interest rates, the executives' level of confidence in overall economic conditions fell by 8.5 percent from its two-year high, in March 2006 (Exhibit 1). Confidence in national economies fell further—mostly in North America and India (even before the Mumbai train bombings)—than did confidence in industries (Exhibit 2).
Nonetheless, the executives remain more positive than negative, and upward of three-quarters of the companies that employ them will at least maintain the workforce at its current size. A slight plurality of the companies plan to hire additional employees.
One factor may explain much of the drop in confidence among executives in India: from mid-May to mid-June—a month before the train bombings—the Bombay Stock Exchange index fell by nearly 30 percent. Indeed, the index hit its second-quarter low while respondents were answering this survey. Nevertheless, even now those in India remain the world's most confident executives—at a level ten points higher than...