88% of US CEOs Say Recession Inevitable... Wall Street Growth Forecasts Also Downgraded

Conference Board Survey: 20% Expect "Stagflation"... Only 12% Predict "Soft Landing" for US Economy
CEO Economic Outlook Also Deteriorates Sharply... Confidence Index Drops 15 Points to 42, Lowest Since Early COVID-19
Wells Fargo Lowers GDP Growth Forecast from 2.2% to 1.5%... Projects 0.5% Decline Next Year

[Asia Economy Reporters Byunghee Park and Hyunjin Jung] It appears that the U.S. real economy is rapidly cooling to the extent that 9 out of 10 American corporate CEOs expect an upcoming recession. Amid prolonged global inflation caused by the Russia-Ukraine war, China's COVID lockdowns and U.S. monetary tightening are hampering global growth.

According to the 2nd quarter CEO Confidence Index survey released on the 18th (local time) by the U.S. nonprofit economic research organization The Conference Board, 88% of respondents predicted a stagflation-including recession in the U.S. The Conference Board asked respondents about their views on the Federal Reserve's monetary policy tightening in this survey.

◆ 61% of CEOs Say "Business Conditions Worsened in Q2" = 57% of respondents answered, "Although inflation will decrease over the next few years, the U.S. will experience a very short and mild recession." CEOs forecasting stagflation, where inflation remains high for years and economic growth slows, accounted for 20%, while 11% expected the U.S. economy to face a severe recession. Only 12% of CEOs predicted a soft landing for the U.S. economy with stable prices and no recession.

CEOs' economic outlooks have significantly worsened compared to the first quarter. The 2nd quarter CEO Confidence Index released that day was 42, down 15 points from the previous quarter. This index being below the baseline of 50 indicates that many CEOs have a negative outlook on the economy. The CEO Confidence Index was the lowest since the early days of the COVID-19 pandemic.

61% of CEOs responded that business conditions worsened in Q2, a sharp increase from 35% in the previous quarter. CEOs expecting business conditions to improve dropped sharply from 50% in Q1 to 19% in Q2, while those expecting conditions to worsen surged from 23% to 60% during the same period.

Dana Peterson, Chief Economist at The Conference Board, analyzed, "Rising prices and supply chain issues caused by the Ukraine war and China's COVID-19 lockdown measures further weakened CEO confidence in Q2."

Bleak forecasts continue on Wall Street as well. U.S. major bank Wells Fargo lowered its U.S. economic growth forecast, predicting a mild recession by the end of this year or early next year.

[Image source=Yonhap News]

Wells Fargo lowered its forecast for U.S. GDP growth this year from 2.2% to 1.5%. It expects GDP to decline by 0.5% next year, whereas its previous forecast had projected a 0.4% increase.

Goldman Sachs CEO David Solomon said in an interview with Bloomberg that Goldman Sachs economists see at least a 30% chance of a U.S. recession within the next 1-2 years, indicating recession risks. Solomon explained that inflation will act like a tax shock on the economy. Mohamed El-Erian, Senior Advisor at Allianz, stated that while the U.S. economy may avoid a recession, it will not avoid stagflation. He also diagnosed stagflation as the worst-case scenario for central banks because it requires achieving two conflicting goals: controlling inflation and maintaining employment.

◆ Concerns Over Economic Slowdown in China, Japan, and Europe = Signs of economic slowdown are evident not only in the U.S. but also in China, Japan, and Europe.

Goldman Sachs lowered its economic growth forecast for China this year from 4.5% to 4%, citing weak April economic data due to the zero-COVID policy. Goldman Sachs noted that Chinese leaders continue to emphasize strict zero-COVID policies and expects reopening will not begin before the second quarter of next year. On the 16th, Citigroup lowered its China growth forecast from 5.1% to 4.2%. Earlier, JPMorgan Chase revised its forecast down from 4.6% to 4.3%, and Morgan Stanley from 4.6% to 4.2%.

Japan announced the previous day that its Q1 GDP growth rate turned negative again at an annualized -1.0%, marking a return to contraction after two quarters. Eurozone countries, directly affected by Russia's invasion of Ukraine, are also facing threats to economic growth this year. The European Economic Commission forecasted on the 16th that if Russia stops gas supplies, the Eurozone's economic growth rate would decrease by 2.5 percentage points. Germany, Europe's largest economy, is expected to grow only 1.6% this year.

This content was produced with the assistance of AI translation services.