Business

Recession drums get louder as more US CEOs hit the soft note for 2023 According to Reuters



© Reuters. FILE PHOTO: A man shops at a Target store during the Black Friday sale in Chicago, Illinois, U.S., November 25, 2022. REUTERS/Jim Vondruska/File Photo

By Medha Singh

(Reuters) – U.S. business is starting to feel the chills of a recession as top executives from companies like JPMorgan Chase & Co (NYSE:), Walmart (NYSE:) Inc and United Airlines paints a bleak economic picture for next year.

A Business Roundtable survey of top U.S. CEOs on Monday found that companies are planning to slow hiring and capital investment over the next six months due to sharply rising borrowing costs. .

The US Federal Reserve’s relentless battle over inflation, now at a multi-decade high, through dramatic interest rate hikes is shaking the economy and forcing companies to lower prices. income forecasting and cost control.

JPMorgan CEO Jamie Dimon warned of a “mild to severe recession” next year as a slowing economy and soaring inflation hit consumer spending, while Scott Kirby ( NYSE: NYSE), his partner at United Airlines, warned air travel demand is faltering, showing “pre-recession behavior,” in their interview with CNBC this week.

Arthur Hogan, chief market strategist at B. Riley Wealth, said: “The CEO’s cautious comment on the 2023 outlook makes sense at this point given a lot of uncertainty surrounding the extent to which the The Fed’s war on inflation will slow the economy.”

Some of the biggest US banks have sounded the alarm about the economy in client notes, with some predicting a slowdown, while others are signaling a full recession. whole.

A Reuters poll of economists released on Thursday showed U.S. economic growth is expected to slow to 0.3% in 2023 after falling up 1.9% this year. It also shows a 60% chance of a recession in the US next year.

Tesla (NASDAQ:) Inc CEO Elon Musk said in October that a recession would last until spring 2024.

Walmart CEO Doug McMillon told CNBC that a recession may be essential to easing inflation for his customers, who are more budget-conscious.

A Wall Street Journal report says Pepsi is looking to lay off hundreds of workers in headquarters positions, potentially joining a list of corporations ranging from big tech companies to consumer companies. Users are reducing headcount to contain costs as they prepare for an uncertain outlook.

INCOME OUTLOOK GRIM

Signs of a recession are prompting US companies and their insurance brokers to lower profit expectations, with companies likely to see their first drop in earnings in two year in the fourth quarter.

In 2023, analysts expect earnings growth at S&P 500 companies to slow to 4.9%, after rising 5.8% in 2022, according to Refinitiv IBES data.

While projections for the size and timing of the recession vary, expectations for an economic recovery largely depend on the Fed’s stance on interest rates.

“While there is considerable uncertainty about the timing and severity of this recession, we think financial markets have may react earlier and more violently than the economy itself.”

The Fed’s brisk pace of rate hikes pushed the S&P 500 down about 17% in 2022 and prevented any major rally in the three weeks before the new year, the benchmark is set for its worst year in four. five.

“The cautious comments continue to make investors skeptical of a full market recovery,” said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New. and is part of the reason the recent rallies haven’t gained much momentum.” Vernon, New Austria.

S&P 500 YTD Performance https://fingfx.thomsonreuters.com/gfx/mkt/znpnbbejgpl/Pasted%20image%201670605408048.png



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