60% of US Small Businesses Expect Economic Recession This Year

82% of US Mid-sized Companies
"Passing Inflation Burden to Consumers"

[Asia Economy Reporter Kwon Haeyoung] About 60% of mid-sized and small businesses in the United States expect an economic recession this year. More than 8 out of 10 mid-sized companies plan to pass on inflation-driven cost increases to consumers through price hikes on products and services.

On the 8th, according to major foreign media, JP Morgan Chase, the largest bank in the U.S., released the '2023 Business Leaders Outlook' report containing these findings. JP Morgan conducted a survey in November and December last year targeting 1,800 business owners working in various industries across the U.S. regarding future economic outlooks and other topics.

According to the survey, 61% of small businesses (with revenues between $100,000 and $20 million) and 65% of mid-sized businesses (with revenues between $20 million and $500 million) anticipated an economic recession within the next year. Only 8% responded positively about the global economic outlook for this year.

Businesses expressed the greatest concern about inflation. Among mid-sized and small businesses, 91% and 45% respectively reported facing difficulties due to inflation or considered inflation the biggest challenge for the new year. The surveyed companies believed that prices are unlikely to decrease and may instead rise further. The majority of small businesses expected operating costs not to decrease.

In particular, most companies responded that if costs continue to rise, they would pass these increases on to consumers through price hikes on products and services. In fact, when rent, labor costs, transportation costs, and material costs surged due to inflation last year, 83% of mid-sized companies and 68% of small businesses reported having already implemented price increases.

[Image source=Reuters Yonhap News]

Price increases by companies contribute to raising inflation. The Fed appears to be mindful of this. According to the minutes of the Federal Open Market Committee (FOMC) regular meeting held in December last year, recently released, Fed officials expressed their intention to continue raising interest rates until inflation is firmly under control. Participants stated, "It is necessary to maintain a restrictive policy stance until there is confidence that inflation is on a sustained downward path to the 2% target." Among the 19 FOMC members, none expected an interest rate cut to be appropriate this year.

Forbes diagnosed, "The COVID-19 pandemic and Russia's invasion of Ukraine have stimulated global inflation, and the Fed's aggressive interest rate hikes to curb inflation have particularly hit the stock and housing markets hard." It added, "Due to the recession, many companies have begun streamlining their organizations through layoffs or hiring freezes, a phenomenon especially prominent among tech companies reliant on advertising revenue," and reported, "Many economists believe the U.S. is at risk of recession, and some think it has already entered one."

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