Economy Flirting Again With a Recession Economist
New York (CNN Business organisation)The mood in the C-Suite is darkening.
CEO confidence has tumbled to the weakest level since the beginning of the Covid-19 pandemic, The Briefing Lath said Wednesday.
For the showtime fourth dimension during the economic expansion, CEO confidence is now in negative territory.
Worse, business leaders are bracing for a potential downturn caused by the Federal Reserve's quest to tame aggrandizement.
A staggering 68% of CEOs surveyed by The Briefing Board expect the Fed's war on inflation will eventually trigger a recession. The survey, fielded between April 25 and May 9, measured responses from 133 CEOs of mostly public companies.
The good news is that simply 11% of CEOs anticipate a then-called hard landing, marked past a deep recession. The remainder expect a "very short, mild" recession.
Importantly, business leaders are non necessarily preparing for an imminent recession. The survey did non specify when the downturn would begin, just describing it every bit "over the next few years."
Inflation triggers recession fears
Nonetheless, the cynicism among CEOs is striking, especially given that the economical recovery is barely ii years old and enjoyed blockbuster growth in 2021.
"Businesses are beingness challenged on so many fronts right now and CEOs have elevated expectations of a recession," Dana Peterson, The Briefing Lath'southward master economist, told CNN.
That's despite the fact that by many measures, the Us economic system remains strong. Retail sales are growing at a healthy clip, the jobs market has nearly returned to pre-Covid levels of employment and businesses are spending aggressively.
Yet the economical environment has gotten tougher to navigate, with worker shortages, price spikes and the war in Ukraine creating challenges. Even some large corporations are struggling.
Walmart (WMT), the rex of retail, dimmed its earnings outlook on Tuesday because of loftier inflation and supply concatenation constraints. Walmart shares plunged xi%, the visitor's worst 1-day decline since Oct 1987.
60% of CEOs expect conditions to worsen
Walmart is not alone. Sixty-1 percent of CEOs surveyed past The Conference Board reported that economical atmospheric condition have worsened over the by six months, compared with 35% who said that during the first quarter. Merely 14% of CEOs reported improving economic weather condition.
Recession fears take been driven in large part by high inflation.
Prices are rising at such a rapid clip that the Fed doesn't have the luxury of merely tapping the brakes on the economy by gradually raising involvement rates. To get inflation under control, the The states central depository financial institution may have to slow the economy so much that it accidentally ends the recovery.
"Recessionary-concerns are real," Mike Sommers, CEO of the American Petroleum Establish, told CNN. He noted that history shows recessions oftentimes follow rapid interest rate hikes.
Perhaps that'due south one reason 60% of CEOs surveyed past The Conference Lath expect weather condition to worsen, upward from just 23% who said that last quarter.
Business organisation leaders similarly reported difficulty attracting qualified workers, signaled wage growth volition remain elevated and downgraded their forecasts for business investment.
Of class, many companies have been able to thrive during this high-aggrandizement period, in part past raising prices on consumers.
More than half (54%) of the CEOs in the survey said they are managing rising input costs by passing them along to customers.
Self-fulling prophesy
Given the strong momentum from last yr, many economists expect the economy volition continue growing for now.
For instance, The Conference Board is projecting pocket-sized GDP growth of 2.25% this year, downwards from half-dozen% in 2021.
Over the weekend, Goldman Sachs trimmed its Gross domestic product outlook, merely it'south nonetheless projecting growth of two.4% this year and i.6% next twelvemonth.
"Concerns about an immoderate near term recession are generally overblown," said RSM chief economist Joe Brusuelas.
Still Brusuelas said it volition be nearly impossible for the Fed to engineer a soft landing.
"The Fed is attempting to thread the needle while wearing boxing gloves and a oral fissure guard which reduces its degrees of liberty to act without causing harm to the existent economy," he said.
Still, the gloomy mood from The Conference Board survey raises the risk of a cocky-fulfilling prophesy, ane in which a recession occurs because businesses hunker down in anticipation of one.
"You can always talk yourself into a recession," Peterson said. "If businesses beginning shedding jobs in apprehension of a recession, that is going to spook consumers -- and that can go us into a recession."
Lloyd Blankfein, the senior chairman of Goldman Sachs, suggested over the weekend that a recession is not a foregone conclusion, telling CBS News it's not "baked in the cake."
Still, he said: "Information technology'due south definitely a risk. If I were running a big company, I would be very prepared for information technology."
Source: https://www.cnn.com/2022/05/18/economy/recession-ceo-confidence/index.html
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