Majority of small businesses believe US is in recession
More than half of U.S. small business owners believe the economy is in a recession, despite their own strong financial conditions and positive outlook for their local economies.
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Posted 8/21/2023, 5:32:00 PM
reuters.com
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Despite initial predictions of a recession, the U.S. economy has experienced unexpected growth, with high consumer spending and continued borrowing and investment by businesses being key factors.
Despite optimistic economic data and the belief that a recession has been avoided, some economists and analysts believe that a recession is still on the horizon due to factors such as the impact of interest rate hikes and lagged effects of inflation and tighter lending standards.
Recent profit reports from companies such as Amazon, Walmart, and Home Depot, along with other consumer statistics, indicate that the case for a 2023 recession is weakening, as the consumer economy shows resilience with rising real incomes, substantial savings, and continued spending in sectors like automobiles and services.
Despite the optimism from some economists and Wall Street experts, economist Oren Klachkin believes that elevated interest rates, restrictive Federal Reserve policy, and tight lending standards will lead to a mild recession in late 2023 due to decreased consumer spending and slow hiring, although he acknowledges that the definition of a recession may not be met due to some industries thriving while others struggle.
The UK and eurozone economies are at risk of recession due to a significant slowdown in private sector activity, with the UK experiencing its poorest performance since the Covid lockdown and Germany being hit particularly hard; the US is also showing signs of strain, with activity slowing to near-stagnation levels.
Recession fears return as a key business survey shows a significant contraction in the UK economy, signaling the detrimental effects of interest rate rises on businesses and heightening the risk of a renewed economic downturn.
The performance of Nvidia stock has been impressive, but other retailers have struggled, leading to concerns about the economy, such as credit card delinquencies, falling home sales, weakening manufacturing, and tightening lending standards. These factors suggest that a recession may be looming.
Societe Generale's Albert Edwards warns that a recession is still looming as small firms face increasing bankruptcies due to high interest rates, which could eventually affect larger firms as well.
Despite weak economic news and concern over a slowing economy, there is still optimism among investors that a recession is unlikely.
Despite recent optimism around the U.S. economy, Deutsche Bank analysts believe that a recession is more likely than a "soft landing" as the Federal Reserve tightens monetary conditions to curb inflation.
Australia's economy is experiencing a per capita recession, with a drop in GDP per capita for the second consecutive quarter, driven by weak household spending and reliance on government spending and population growth.
The US economy is predicted to enter a recession by spring, leading to a 25% or more crash in the S&P 500, according to economist David Rosenberg, who warns that American consumers are nearing their spending limits and rising home prices reflect a weak housing market.
Despite positive economic growth and low unemployment rates, several major indicators suggest that the American economy under President Joe Biden is heading towards a recession, with high government deficit numbers indicating possible overspending to prevent a recession before the 2024 election.
The odds of a recession in the US have collapsed, making markets vulnerable to any signs of the economy overheating and contributing to inflationary pressures.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
Canada's economy is struggling and heading towards a recession, with declining incomes and high household debt, leading to growing dissatisfaction with Prime Minister Trudeau and his government.
Goldman Sachs CEO David Solomon believes the U.S. economy is unlikely to experience a significant recession, but warns that inflation will be more persistent than anticipated.
American small businesses are expressing a lack of confidence in elected leaders and attributing their hardships to government regulation, high taxes, and inflation, according to a survey conducted by PublicSq. and RedBalloon. However, businesses remain optimistic about expanding and hiring in the future.
Entrepreneur Jaspreet Singh warns that signs of a potential recession in America include labor shortages, inflation-driven spending, and high interest rates, with economists predicting that the country may start feeling the effects of a recession by the second quarter of 2024. Singh advises Americans to educate themselves about saving money and investing to prepare for the possible downturn.