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Respondents report renewed optimism on the economy. But political and trade-related risks continue to loom.

Executives are more upbeat about current economic conditions—both globally and in their home countries—than they were for all of 2016, in McKinsey’s latest survey on the topic. They are nearly twice as likely as in the past two surveys to say conditions in the world economy have improved in recent months, and they report notable improvements in their home economies, too. Their views on the future, though, are more tempered. Respondents are more optimistic than not about economic prospects but doubt conditions will improve much more than they already have.

Despite the growing bullishness, respondents continue to cite political and trade-related risks most often as threats to growth, as they did in December. Changes in trade policy, which we asked about for the first time in this survey, are an outsize risk in developed economies. They are a particular sore spot in the United States, where respondents are the most likely to cite such changes as a risk to both global and domestic growth. When asked about risks at the company level, the largest share of respondents say regulatory changes are threats to their businesses.

A turnaround in global views, though geopolitical and trade concerns prevail

Overall, executives are much more bullish about the global economy than they were for all of 2016 (Exhibit 1). Nearly half of them say conditions in the world economy are better now than they were six months ago—far surpassing expectations from six months prior, when only 28 percent expected improvements. While they are also more optimistic about the world economy’s prospects, respondents aren’t convinced that the future will be much rosier. Forty-two percent believe conditions will improve, a slightly smaller share than say conditions have improved in recent months. Across regions, respondents in developed economies are less upbeat about the future than they are about current conditions. In Asia–Pacific, for example, almost half of respondents say global conditions have improved in recent months, but only one-third predict further improvements in the next six months.

Despite this newfound positivity, the same issues that executives identified three months ago as threats to global growth—geopolitical instability, politics, and trade—still loom (Exhibit 2). Geopolitical instability has been the most identified risk for the past three surveys. A slowdown in global trade—which rose on the list of risks in December—is now less of a concern, while more than four in ten respondents cite changes in trade policy, which we asked about for the first time. Policy changes are especially top of mind for executives in North America, Latin America, and Asia–Pacific.

Other responses suggest a growing sanguinity about the pace of global trade. Executives are more likely to say that trade between their home countries and the rest of the world has increased in the past 12 months, rather than stayed the same or decreased. Views on trade are especially positive in Asia–Pacific. Just three months ago, respondents in the region were the likeliest to report declining trade: half of respondents there said trade levels had declined, compared with one-third of all respondents. Now they are twice as likely to say trade has increased than declined, much less likely than in December to say the change in trade levels has harmed their business (16 percent now, down from 43 percent), and likelier to believe trade levels will increase rather than decrease in the year ahead.

Their peers in North America, though, are much less optimistic. Respondents in the region are the least likely to say trade levels have increased in the past 12 months—followed closely by those in the Middle East and North Africa and in other developing markets, who tend to report declining trade. Looking ahead, they are the most likely to expect decreasing trade levels. Fifty-two percent in North America predict trade between their home countries and the world will decline in the next year, compared with a global average of 35 percent.

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Here is a direct link to the complete article.

The contributors to the development and analysis of this survey include Martin Hirt, a senior partner in McKinsey’s Taipei office, and Sven Smit, a senior partner in the Amsterdam office. They wish to thank Alan FitzGerald and Vivien Singer for their contributions to this article.