Business survey shows recession risks elevated
The latest survey from the National Association for Business Economics found that more than half of respondents put the possibility of a recession over the next year at 50% or higher.
“The results … indicate widespread concern about entering a recession this year,” said NABE President Julia Coronado, founder and president of MacroPolicy Perspectives LLC. “For the first time since 2020, more respondents expect falling rather than increased employment at their firms in the next three months.”
The association’s Business Conditions Survey looks at the responses of 60 members from Jan. 4-11 on business conditions. It comes amid a wave of mass layoffs in the technology sector and despite continued optimism from the White House.
Respondents reported higher interest rates and costs as the biggest downside risks to their outlooks. Sixty-three percent of respondents reported rising wages over the past three months. That was unchanged from the October 2022 survey. They further reported that sales growth in the fourth quarter of 2022 was relatively unchanged from the previous quarter.
The Net Rising Index for sales — the percentage association panelists reporting rising sales minus the percentage reporting falling sales — in the fourth quarter of 2022 was 8, unchanged from the October 2022 survey. It is the lowest NRI for sales growth since the negative reading during the pandemic in the first half of 2020. The forward-looking NRI fell to 5 from 20 in the October survey, indicating weaker expectations for sales over the next quarter, according to the association.
“The survey results reveal an unevenness across indicators,” said NABE Business Conditions Survey Chair Carlos Herrera, chief economist for Coca-Cola North America. “Wages rose at a majority of respondents’ firms in the last three months of 2022 and more firms added workers than reduced headcounts. But far more firms than in the past three years reported falling profit margins.
“The panel suggests that inflation may be easing with the outlook for prices charged at its lowest reading since the October 2020 survey, overall,” Herrera said. “Materials costs have drifted down significantly since last July, and more respondents expect falling costs in the next three months.”
The survey comes on the heels of mass layoffs in several big-name tech businesses. Last week, Google’s parent company Alphabet laid off 12,000 employees. Microsoft laid off 10,000 employees. On Monday, streaming platform Spotify announced it was laying off 6% of its workforce. That’s about 600 employees.
President Joe Biden’s Press Secretary Karine Jean-Pierre said Tuesday that she wouldn’t speculate on why companies were laying off employees.
“Our economy is continuing to grow in a steady and stable manner as we have said,” she said during a news brief at the White House. “You just have to look at the economic data.”
The Consumer Price Index for All Urban Consumers declined 0.1% in December on a seasonally adjusted basis, after increasing 0.1% in November, the U.S. Bureau of Labor Statistics reported earlier this month. Over the last 12 months, the all items index increased 6.5% before seasonal adjustment.
“Layoffs remain near record lows according to job opening data,” Jean-Pierre said.
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