Two in three small and medium-sized U.S. businesses see the country slide into recession next year, JPMorgan Chase researchers say in the latest study to warn of inflation’s relentless toll on the economy.
The Wall Street bank’s annual Business Leaders Outlook for 2023, released Thursday, found that 65 percent of midsize and 61 percent of small businesses saw a recession, while most small business bosses expect high prices to continue. continue to exist.
The findings dovetail with other economist and consumer surveys, which say the rising inflation and economic pain of 2022 will continue for months to come and the U.S. will at least experience a “slowdown” from near-zero growth.
They also follow announcements this week from Salesforce and Amazon of major layoffs totaling some 26,000 workers this year, the latest job cuts in a brutal period for the technology sector.
Ginger Chambless, a lead researcher at JPMorgan Chase, said the “challenging headwinds” of inflation, which hit a 40-year high of 9.1 percent in June, “began to moderate and should cool in 2023.”
JPMorgan Chase’s annual Business Leaders Outlook found that most bosses envisioned a recession next year, but often felt they could increase sales and perhaps even profits
Still, she cautioned that high prices will affect spending in the coming months and that “companies may still want to consider adjusting strategies, pricing or product mixes to weather the near-term storm.”
About 90 percent of midsize business bosses said their businesses struggled with inflation, while 45 percent of small business owners said rising prices were their top concern, up 20 percent from last year’s survey.
Despite the ugly start to 2023, bosses are still showing signs of hope. The survey of 1,799 executives found that about two-thirds expected revenue and sales to increase this year — and about half also expected earnings to grow.
The JPMorgan Chase study follows a Gallup survey of 1,800 adults this week that found Americans entered 2023 expecting more economic uncertainty, political turbulence, and higher unemployment and crime.
About eight in ten say 2023 will be a year of economic hardship, with higher taxes and a growing budget deficit. More than six in 10 say prices will rise at a rapid pace and the stock market will fall over the next year.
Those sentiments follow the dismal economic trajectory of 2022 — Wall Street’s worst year since the 2008 global financial crisis, which saw inflation hit a 40-year high of 9.1 percent in June.
Annual inflation fell to 7.1 percent in November, but the Federal Reserve may decide to keep raising interest rates, which were close to zero in March but were between 4.25 and 4.5 percent at the end of 2022.
A survey of 1,800 adults found that Americans entered 2023 expecting more economic uncertainty, political turbulence, unemployment and crime
Annual inflation fell to 7.1 percent in November, but the Federal Reserve may decide to raise interest rates further
Similarly, a Wall Street Journal survey of 23 primary dealers, the major financial firms that deal directly with the Fed, found that a majority expect a recession in the coming year.
On his own study, Moody’s Analytics said the US could stave off a full-blown economic downturn, but would nonetheless experience a “slowdown,” with the economy crumbling to near-zero growth.
“Under almost any scenario, the economy will face a difficult 2023,” Moody’s chief economist Mark Zandi said in the report.
‘But inflation is declining rapidly and the fundamentals of the economy are sound. With luck and reasonably nimble policymaking by the Fed, the economy should avoid an outright downturn.”
Amazon announced on Wednesday that it will cut more than 18,000 jobs from its workforce, citing “the uncertain economy” and the fact that the online retail giant had hired “rapidly” during the pandemic. Pictured: An Amazon warehouse
By the Fed’s preferred measure, inflation is still nearly three times the 2 percent target.
Rising prices have forced consumers to quickly save on their savings, which soared during the COVID-19 pandemic thanks to stimulus measures and a slowdown in spending.
The personal savings rate fell to 2.4 percent in November, well below the pre-pandemic average of 8.8 percent in 2019.
Consumers are also increasingly tapping lines of credit to make ends meet.
Total household loans reached $16.51 trillion in the third quarter, up $351 billion from the previous quarter and up 8.3 percent from a year ago, the fastest annual increase in 14 years , according to data from the Fed.
Higher interest rates have had the most dramatic impact on the housing market, where sales activity collapsed in the second half of last year.
Household wealth (black line) fell another $400 billion in Q3 to $143 trillion, marking third consecutive quarterly decline
Total household borrowing reached $16.51 trillion in the third quarter, up $351 billion from the previous quarter and up 8.3 percent from a year ago
The 30-year fixed mortgage rate passed 7 percent in October for the first time since 2002, more than doubling in a nine-month span.
It has deflated a red-hot housing market fueled by historically low borrowing costs and a rush to the suburbs amid the pandemic.
Existing home sales fell 7.7 percent in November from October, according to the National Association of Realtors — and November sales fell a whopping 35.4 percent year-over-year.
The NAR added that the current 10-month series of declines is the longest ever recorded in data stretching back to 1999.
Banks have also tightened lending standards in recent months, a traditional leading indicator of a recession.
Sales of existing homes fell by 35.4 compared to a year ago. For a variety of reasons, including the doubling of 30-year mortgage rates, Americans are refraining from buying homes
The conflicting signals from the economy since the pandemic have baffled many economists.
The unemployment rate remains relatively low at 3.7 percent. Fed policymakers predict it will rise to 4.4 percent this year.
The stock market spent much of 2022 bracing for a recession. The benchmark S&P 500 index ended the year with a loss of 19.4 percent.
It’s only the third annual decline since the financial crisis 14 years ago and a painful turnaround for investors after the S&P 500 posted a gain of nearly 27 percent in 2021.
All told, the index lost $8.2 trillion in value, according to S&P Dow Jones Indices.