The number of businesses that see a 50 percent chance or higher of a recession in 2022 has fallen from around two-thirds of respondents in October to just over half this month, according to a new survey from the National Association of Business Economics (NABE).
Businesses pointed to higher interest rates as the biggest downside risks, while identifying lower interest rates, higher labor participation and easing supply chain issues as the biggest upside risks. Overall though, recession fears remain elevated, and job growth expectations are waning.
“For the first time since 2020, more respondents expect falling rather than increased employment at their firms in the next three months," said Julia Coronado, president of NABE and founder and president of MacroPolicy Perspectives LLC, in a news release. "Fewer respondents than in recent years expect their firms' capital spending to increase in the same period.”
At the same time, more firms are reporting falling profit margins.
“Wages rose at a majority of respondents’ firms in the last three months of 2022 and more firms added workers than reduced headcounts," said Carlos Herrera, business conditions survey chair at NABE and chief economist for Coca-Cola North America. "But far more firms than in the past three years reported falling profit margins.
NABE's index for profit margin expectations is now down to its lowest level since mid-2020.
Yet tempering these concerns is a widespread expectation that inflation will continue to fall.
“The panel suggests that inflation may be easing with the outlook for prices charged at its lowest reading since the October 2020 survey, overall,” said Herrera. “Materials costs have drifted down significantly since last July, and more respondents expect falling costs in the next three months.”
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