Most business leaders are facing a recession — or think the U.S. economy is already in one, according to a new survey.
Findings released by Stifel Financial show that 18% of corporate executives, business owners and private equity investors believe the economy has already contracted and is in recession. This compares to about 79% who expect a recession in the next 18 months.
In comparison, a small proportion of executives — around 3% — believe a recession can be avoided entirely.
“Given the uncertain backdrop, it makes sense that companies are planning for a possible prolonged recession, considering a variety of economic scenarios and their prospects for strategic planning over the next year. “Michael Collender, Head of Consumer, Retail and Diversified Industry Investment Banking at Stifel. “Market conditions and economic cycles often change rapidly.”
The study also revealed that companies feel the biggest threat to profitability is painfully high inflation and ongoing labor shortages.
More than half of respondents – 55% – expect inflation to remain a problem for the next two quarters to a year, while another 43% expect higher prices to persist even longer.
The study found that companies see obscenely high inflation as the biggest threat to profitability. Photo by Spencer Platt/Getty Images
New data released by the Labor Department last week showed that consumer prices rose 8.5% in July and were unchanged from the previous month. Despite a significant slowdown since June, inflation remains near its highest level in 40 years, causing financial pain for both consumers and businesses.
There is a growing consensus on Wall Street that the Federal Reserve will trigger a recession as it fights inflation with a series of aggressive rate hikes. Policymakers approved a second rate hike of 75 basis points in July and indicated that another outsized rate hike in September is on the table based on forthcoming economic data.
Fed Chair Jerome Powell has said tackling inflation is the central bank’s top priority, even if it means taking the risk of a recession – although he insisted he didn’t think the US was currently in a recession.
“We believe it is necessary to slow growth,” he said in July. “We really believe we need a period of below-capacity growth to create some slack for the supply side to catch up.”