Majority of SMEs in US expect recession in '23: JP Morgan survey

The heightened recession expectations also come as businesses nationwide continue to combat inflation. Nearly all midsize businesses (91 per cent) are experiencing inflation challenges, while 45 per cent of small businesses listed inflation as a top challenge for the year ahead, up from 20 per cent one year ago. Inflation has forced small and midsize businesses to re-evaluate approaches to pricing, sourcing materials, and running operations and has had widespread impacts.

Passing costs onto consumers was one of the widespread impacts of inflation on SMEs, as 83 per cent of midsize businesses passed at least some increased costs onto consumers and buyers, while 68 per cent of small businesses raised prices on select or all products and services, according to the JP Morgan Chase survey.

Furthermore, 94 per cent of small businesses said inflation has impacted expenses, with 38 per cent noting that expenses increased by 11 per cent or more. Leading cost drivers for both small and midsize businesses include wages and benefits costs for hiring and retaining employees, shipping, and other supply chain-related expenditures, including costs of raw materials.

About 82 per cent of midsize businesses are likely to continue to increase prices to mitigate costs, while the majority of small businesses expect that higher costs for labour, rents, shipping, and materials are here to stay.

Despite the shared consensus on a recession in 2023, small businesses remain more optimistic in their economic outlooks than midsize business leaders, who expressed much more downbeat views compared to this time last year.

Midsize businesses expressing optimism for the global economy declined to 8 per cent from 34 per cent one year ago, and the number of businesses optimistic about the national economy fell to 22 per cent from 50 per cent at the start of 2022. Conversely, nearly half of small businesses, which are less likely to have exposure to national and international markets, expressed optimism for the national and global economy at 49 per cent and 45 per cent, respectively, which is similar to last year’s sentiment.

Small and midsize business leaders’ outlook for their own company’s performance remains high, with 72 per cent of small businesses and 66 per cent of midsize businesses expressing optimism for the year ahead.

More than two-thirds (69 per cent) of small businesses expect increased revenue and sales in the year ahead and 65 per cent anticipate greater profits in 2023. Similarly, 63 per cent of midsize businesses expect increased revenue and sales in 2023, and 51 per cent predict greater profits.

Concerns of a recession and dimmed economic outlooks largely aren’t restraining 2023 hiring plans, as 51 per cent of small business leaders anticipate hiring full-time employees and 50 per cent of midsize business leaders expect to increase headcount.

ALCHEMPro News Desk (DP)