Global growth, which rocketed in '21 with all the pent-up demand from the COVID lockdowns as well as the massive government stimulus, has been falling for 8 straight quarters. The S&P is down from a peak of 25% growth in Q2 '21 to 1% in Q3 '23. We do not know where the floor is and, more importantly, what is steady state growth going forward. The Magnificent Seven have been the shining stars of growth and hope, but time will tell if even these giants can stay strong. Much of the growth was pricing and inflation-based, so now that the trick has been mostly played out, what can we show for real unit growth?
Europe and the U.S., which were growing 6% in COVID, are projecting 1-2% for Q4 '23. China is self-destructing and their government projections can't be trusted. Country GDP numbers across the world are best case slow growth and possibly negative / recession. For tech companies, we are still trying to find the bottom on the growth curve, making most projections suspect for '24. Uncertainty around the outlook for companies' growth is driving a keen focus on efficiency and performance. Some are sacrificing growth for the sake of better unit economics and preservation of cash, and others with solid growth like Facebook and Microsoft are cranking up the EBITDA margins to their full potential.
So for us in the M&A trenches, slowing growth is not fun. We hear about portfolios that were projecting 40% growth for '23, hit the massive headwinds, and are now looking for 20% growth. Companies with decelerating growth have a hard time accepting that reality and continue to miss projections. Taking a company to market with slowing growth is generally not advisable, and projecting accelerating growth in this environment is generally not credible with our buyers. Suffice it to say that for the time being, we are finding fewer growth stories to bring to market.