Things are not looking very good for the economy at the moment.
- A recent survey revealed that 91% of CEOs believe a recession is imminent.
- Many believe that the recession will be long.
- This could affect your finances for a few key reasons.
US business leaders are not optimistic about the direction of the economy. In fact, according to a survey conducted by KPMG, a consulting firm, around 91% of the leaders of 400 large American companies believe that a recession will occur in the coming year.
A recession has long been defined by many people as two consecutive quarters of negative economic growth, but other factors, including the unemployment rate, can also affect whether the country is in a recession. And some people, including many CEOs, think we’re on the brink of a major economic downturn that could affect people’s finances in profound and negative ways.
“There has been enormous uncertainty over the past two and a half years,” KPMG US chairman and chief executive Paul Knopp said, referring to both the global pandemic and inflationary concerns as prices soared. “Now we have another recession looming.”
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CEOs are pessimistic about more than just the possibility of a recession
The KPMG survey contained a lot of bad news. Not only have the vast majority of business leaders indicated they believe a recession is imminent, but many also believe the economic downturn will last for a long time. Only 34% of survey respondents said they thought the recession would be short-lived, while 66% – the vast majority – think we’re on a long, hard road.
Most CEOs who responded to the survey also said they believed the coming recession would be more than a modest setback. And many are watching for news about the upcoming midterm elections, which could impact the stability of the economy and the likelihood of a prolonged economic downturn.
“There is real uncertainty about the outcome of the midterm elections and the potential for tougher tax laws and increased regulation,” Knopp warned.
Should we be worried?
Clearly, there are good reasons to be concerned, with the majority of corporate CEOs warning that a long recession is about to hit the United States. And many of these entrepreneurs too indicated that their companies are taking action now to prepare for the coming downturn.
In most cases, businesses preparing for a recession will lay off employees to cut costs and respond to what is most likely to be a reduction in demand for goods and services. Unfortunately, as more and more people become unemployed and cut spending, the overall economy deteriorates.
In this way, fears of a recession could be a self-fulfilling prophecy as business leaders lay off workers in anticipation of a downturn, then those workers stop spending and lead to reduced demand. “Companies can’t overreact in the short term because that can create long-term problems,” Knopp warned.
If you work for a company that could potentially lay you off due to upcoming economic problems, you may be very worried right now, and with good reason. Likewise, if you’re in dire financial straits with high credit card bills or a mortgage that you’re struggling to pay, you’re also not in a great position to weather a recession.
But if you have a big emergency fund, hopefully that extra cash can help you out until things change. You may still have reason to worry about your job security (depending on where you work), but at least you’ll know that your emergency savings can cover the essentials for a while if it doesn’t. must.
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