The main CEO does not agree with the view that the US economy may achieve a soft landing after the Federal Reserve launched a series of historic large rate hikes in to fight inflation.
According to a survey by consulting firm KPMG on 400 leaders of major U.S. companies, up to 91% of people expect a recession in the next 12 months. More importantly, a survey released on Tuesday found that only 34% of these CEOs believed the recession would be moderate and short-lived. "There has been a huge uncertainty over the past two and a half years," said Paul Knop, chairman and CEO of KPMG America, of the Covid-19 pandemic and concerns about inflation. "Now, we are facing another imminent recession."
is preparing for the downturn and planning to cut spending. A good way to cut costs? Layoffs. KPMG noted that more than half of CEOs are considering layoffs in response to the recession.
But there are some (slightly) promising signs.
Although most CEOs believe that the recession is more than just a small decline, many executives believe that they are now able to deal with such a severe economic reality than they did in 2008.
Lehman Brothers collapse, global financial crisis and the Great Recession caused the unemployment rate to double from early 2008 to the end of 2009, rising from 5% to 10%.
"People are optimistic about the long-term prospects of the U.S. economy and the prospects of their own organizations," Knop said. "The company thinks it is more resilient and more prepared."
also note that when the economy briefly fell into recession two years ago during the pandemic, the company recently underwent a downturn. In April 2020, the unemployment rate soared to an all-time high of 14.7%.
But Knop said the CEOs are obviously very nervous about the short-term outlook for the economy and they intend to adjust some of their long-term spending plans. One area that is particularly likely to be impacted is investment in ESG work.
Knopp notes that while many CEOs say they believe their business will improve in the long term due to environmental, social and governance initiatives, they may need to suspend some of these efforts in the coming year or so to reduce costs.
He added that companies are aware that too many layoffs and excessive spending cuts may pose greater risks.
"Companies cannot overreact in the short term because it can cause problems in the long term. The pandemic still brings urgent concerns for companies," Knop said. "Businesses hope that the economy will take off again quickly after a slowdown."
Knop said that before any long-term investment plan , CEOs will also pay close attention to Washington's midterm elections and political landscape more widely.
He said: "There is indeed uncertainty about the outcome of the midterm elections and the possibility of stricter tax legislation and strengthening supervision." The concerns of the leaders of top companies are obviously shared by the heads of small companies.
accounting and consulting firm Marcum LLP and Hofstra University’s Frank G. Zarb Business School last month conducted a survey of mid-market companies, which showed that more than 90% of mid-sized companies CEOs were worried about the recession. More than a quarter of CEOs said they have started laying off employees or planned to lay off employees in the next 12 months.
