A recent survey of CFOs found that most believe a recession will hit within the next 12 months and none believe the US economy will escape a downturn.
The CNBC CFO Council poll released Thursday found that 68 percent of CFOs who took part in the poll expect a recession to hit in the first half of 2023.
No CFO predicted a recession later than the second half of next year, and no CFO surveyed believe the economy will avoid a recession.
It’s the latest warning sign that the US economy could be headed for a cliff after a period of explosive growth as rising energy costs and Federal Reserve rate hikes weigh on expansion.
The Dow is down 10% since the start of the year and most CFOs believe it must fall further, forecasting a recession in the first half of next year
Traders will be seen on the NYSE earlier this month. Markets are nervous about growth prospects as many experts are now predicting a recession in the next 12 months
The CNBC survey found that over 40 percent of CFOs cite inflation as the top external risk to their business, and nearly a quarter cite Federal Reserve policy as the top risk factor.
To tame inflation, the Fed has raised interest rates by 75 basis points since March and started trimming its $9 trillion balance sheet by selling bonds it bought during the COVID-19 pandemic.
The Fed is expected to hike the federal funds rate by half a percentage point at each of its next meetings this month and in July.
Just over half of the CFOs surveyed said they were confident that the central bank would be successful in controlling inflation, but that didn’t change their view that the economy was headed for recession.
The warning signs for the US economy have increased in recent weeks after gross domestic product contracted an unexpected 1.5 percent in the first quarter.
A second straight quarter of negative GDP growth would spell an official recession, but so far most economists still believe a slowdown won’t materialize until 2023.
The US economy contracted unexpectedly in the first quarter, falling 1.5 percent, partly on the back of a widening trade deficit
In April, consumer prices rose 8.3 percent year-on-year, just below the fastest rate increase in four decades, recorded a month earlier
Earlier this week, the World Bank slashed its global growth forecast for 2022 by almost a third, warning that the risk of 1970s-style “stagflation” was increasing and saying many countries are now facing recession.
“The risk of stagflation is significant today,” World Bank President David Malpass wrote in the preface to Tuesday’s report, which lowered global growth forecasts for 2022 to 2.9 percent.
The International Monetary Fund also expects to further lower its forecast for 2022 global economic growth next month, IMF spokesman Gerry Rice said on Thursday.
That would be the third downgrade this year. In April, the IMF had already lowered its forecast for global economic growth by almost a full percentage point to 3.6 percent in 2022 and 2023.
Rice, speaking at a regular IMF briefing, said the broad outlook still called for growth around the world, albeit at slower levels, but warned a number of countries could be facing recession.
Also, Jaime Dimon, CEO of JPMorgan Chase, issued a stark economic warning last week, saying rising commodity prices and tighter monetary policy could deliver a “hurricane” hit to the US economy.
Speaking at a banking conference in New York on Wednesday, Dimon warned the gathering of investors and analysts, “You better brace yourself.”
“I said there were storm clouds out there, big storm clouds, but it’s a hurricane,” the US banking titan said.
“Right now it’s kind of sunny, things are going well, everyone thinks the Fed can handle it. This hurricane is out there, down the road, coming our way. We just don’t know if it’s a small one or Super Storm Sandy,” he added.
“JPMorgan is gearing up and we’re going to be very conservative with our balance sheet,” he said.