Inflation was reaching what appeared at the time to be generational highs. Labor market imbalances, most acute in the United States and the United Kingdom, boosted wages up to two times the pre-COVID-19 pace. 4 McKinsey analysis of data from the Baltic Exchange and Cass Information Systems, Goldman Sachs Commodity Index, and Haver Analytics. Commodity prices were up 30 percent, global container shipping rates nearly tenfold, and inland freight haul rates soared. McKinsey analysis of US Bureau of Economic Analysis (BEA) data and the BEA’s National Income and Product Accounts. 3 US consumer spending on goods was up 15 percent above the 2010–19 trend in March 2021. Logistics teams continued to struggle with fractured supply chains amid record demand. In January 2022, the COVID-19 Omicron variant was spreading fast. Looking back one year, the world was facing numerous tests. Understanding 2022’s economic headlines: Inflation and labor markets We hope such leaders can use these scenarios to make practical decisions to reach their goals. We find that the best leaders and companies navigating these volatile times are both prudent about managing the downside and aggressive in pursuing the upside. 2 We will consider the implications for European countries outside the eurozone, Asia, Africa, and the Americas in early 2023. We then share McKinsey’s new macroeconomic scenarios, focusing on the United States and the eurozone. See for example the role that US natural gas could play in solving the global energy crisis: Michael Dalena, Dumitru Dediu, Luciano Di Fiori, and Brandon Stackhouse, “ How North American natural gas could alleviate the global energy crisis,” McKinsey, Novemhow Germany might develop a safe, sustainable power supply by 2025: “ Electricity price reduction to competitive level feasible by 2025,” McKinsey, Decemand our longer-term perspective on the energy transition: Global Energy Perspective 2022, McKinsey, April 26, 2022. 1 This analysis complements our published perspectives on global energy markets. We believe it is important to lay out the facts on these topics, which have thus far avoided consensus, so leaders can create lasting solutions. To put the scenarios into context, we begin with our views on the top issues of 2022: inflation and labor market dislocations. Some might conclude that their business model and strategic moves would remain largely the same across the macro outcomes they consider plausible, while others may see different opportunities and risks. Leaders must decide which actions they should take regardless of how the environment plays out and what calibrated risks they should pursue in a bid to move their companies boldly forward. The scenarios consider favorable and not-so-favorable long-term outcomes and delineate the shorter-term choices that will largely determine which path the global economy could ultimately take. To help leaders answer this question, McKinsey has developed a wide range of macroeconomic scenarios for 2023 and beyond.
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