This post was originally published on this site
High inflation, rising interest rates and talk of recession has got American business leaders feeling down: A new survey shows just 19% of senior executives at mid-sized firms are optimistic about the economy in the year ahead.
The level of confidence is the lowest in the 12-year history of the JP Morgan Chase survey, the firm said. It’s even worse than early in the pandemic.
By comparison, three-quarters of business leaders felt confident about the economy one year ago.
By many measures, the U.S. economy has appeared to slow in 2022.
The Federal Reserve is ratcheting up a key short-term interest rate that it kept near zero during the pandemic to try to reign in runaway inflation. The cost of living has jumped 8.6% in the past year, the biggest increase since 1980.
Higher rates, combined with ongoing supply and labor shortages, are likely to slow the economy further. That could reduce hiring, induce more layoffs, cause consumers to cut spending and spur businesses to slash investment.
In a worst-case scenario, the U.S. could even suffer its second recession in three years. More and more Wall Street
DJIA,
economists predict a recession is likely in the next year or two.
Yet even as they worry about the broader U.S. economy, some 71% of the 1,500 business leaders surveyed said they are optimistic about how their companies will perform. Nearly three-quarters expect higher sales in the year ahead and 57% predict stronger profits, too.
Both figures are down from last year, however.
If executives are right about their own companies’ performances, though, it would suggest the economy could prove to be resilient and that a recession isn’t inevitable.
“While it’s surprising to see how drastically sentiment has shifted, it is important to note that business leaders are still mostly upbeat when it comes to their companies and areas that they can more directly control,” said Ginger Chambless, head of research at JPMorgan Chase Commercial Banking.
Still, high inflation is taking a toll. A whopping 99% said their costs have increased and 76% plan to raise prices on customers again. These price pressures are unlikely to fade quickly either, executives said.
