Ian Patrick, FISM News
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Inflation and the fears of recession have hit businesses hard, according to a new survey.
The survey from Stifel Financial shows that 97% of questioned business owners, executives, and investors believe that the U.S. is either in a recession or will be in one by the end of 2023. Only 3% said they believe a recession can be avoided.
Inflation also continues to plague business confidence. The survey shows that 50% of the 70 respondents are “very concerned” about the impact of inflation, while 39% are “moderately concerned.” Another 10% are “slightly concerned” and only 1% say they are “not concerned at all” about inflation.
Yet, all surveyed persons expect inflation risks to remain a challenge, including 53% who said that these risks could last anywhere from the next quarter to one year from now and 43% who believe the risks will remain for longer than one year. Only 4% believed that inflation would continue only until the end of fiscal year 2022.
As for how these businesses are dealing with increased prices, Stifel Financial found that 81% are passing the burden onto consumers. Another 14% are absorbing the costs into their profit margins, 3% are cutting their overheads, and 2% are outright changing their suppliers.
The survey also touched on labor markets, asking businesses how they are addressing the current environment. Of these, 68% have indicated a significant investment in automation and other technology to offset open positions.
Many businesses seem to think that the supply chain issue is coming to an end, including 59% who said that supply chain disruptions have improved since last year. However, 20% say the issues have become worse and another 21% indicated that there was no change in supply chain disruptions within the year.
As far as raising interest rates are concerned, most businesses are seeing at least a slightly negative impact on raising capital (86%). Only 14% said there was no negative impact at all.
Organized by what issues pose the greatest risks, these respondents said labor constraints (64%), inflation (59%), recession (54%), and supply chain disruption (53%) are of the greatest concerns. Others pointed to market volatility (14%), rising interest rates (10%), and cyber threats (10%) as significant risks. Only 3% of companies indicated concern over COVID-19.
In a press release Michael Kollender, the head of Consumer, Retail, and Diversified Industrials Investment Banking at Stifel Financial, said these results are “consistent with what we are hearing from both corporate executives and financial sponsors during everyday conversations.”
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. Market conditions and economic cycles often turn quickly, serving as a reminder of why executives, entrepreneurs, and investors must have a clear understanding of the external forces impacting their businesses and the ability to consistently adapt.
This report follows a July poll which showed that 47% of small business owners fear they will be forced to shutter their companies, according to FISM News.
It also follows the latest consumer confidence index, which dropped for the third straight month in July. The decrease in confidence was due to a mix of inflationary woes and fears of recession, according to FISM News.
With the most recent CPI report showing an 8.5% increase in prices from July 2021 to July 2022, it’s no wonder that inflation is causing this much anxiety.