The vast majority of corporate executives are bracing for a recession — or think the U.S. economy is already in one, according to a new survey.
Findings published by Stifel Financial show that 18% of corporate executives, business owners and private equity investors believe the economy has already contracted and is in a recession. That compares to about 79% of whom expect a downturn within the next 18 months.
By comparison, just a small fraction of executives — about 3% — think a recession will be avoided altogether.
"Given the uncertain backdrop, it’s understandable that companies are planning for a potential prolonged downturn and are considering various economic scenarios, as well as their approach to strategic planning over the next year," said Michael Kollender, head of consumer, retail and diversified industrials investment banking at Stifel. "Market conditions and economic cycles often turn quickly."
The study also showed that businesses think the biggest threat to profitability is painfully high inflation and a persisting labor shortage.
More than half of respondents — 55% — expect inflation to remain problematic for the next two quarters to a year, while another 43% anticipate high prices lasting even longer.
New data published last week by the Labor Department showed that consumer prices climbed 8.5% in July and were unchanged from the previous month. While that marked a noted slowdown from June, inflation remains near the highest level in 40 years, continuing to inflict financial pain on consumers and businesses alike.
There is a growing consensus on Wall Street that the Federal Reserve will trigger a recession as it battles inflation with a series of aggressive interest rate hikes. Policymakers approved the second consecutive 75-basis-point rate hike in July and have indicated that another super-sized rate hike is on the table in September, depending on forthcoming economic data.
Fed Chairman Jerome Powell has said that tackling inflation remains the central bank's No. 1 priority, even if it means risking a downturn — though he stressed that he does not believe the U.S. is currently in a recession.
"We think it’s necessary to have growth slow down," he said in July. "We actually think we need a period of growth below potential in order to create some slack so that the supply side can catch up."