A majority of economists now think a recession is inevitable, perhaps starting before the end of the year. A stunning 98% of CEOs say they are preparing for a recession in the next 12 to 18 months, a new poll shows.
Almost every CEO in America is getting ready for a recession and a majority of economists now believe a downturn is coming soon. Why such doom and gloom?
Racing to to catch up, the Fed since March has raised its key short-term interest rate to as high as 3.25% from near zero, where it sat for almost two years. Cheap money helped fuel runaway inflation. The shock effect of soaring mortgage rates has taken a toll on home sales and home construction. Spending on home furnishings, appliances and other big-ticket items that new homeowners need have also fallen off.Households are expected to reduce spending in response to higher borrowing costs. Companies would also reduce investment. And if business sales and profits tail off, layoffs and rising unemployment would follow to complete a vicious cycle.
“It’s hard not to interpret this sentiment as anything but a willingness to sacrifice economic growth for the sake of restoring price stability,” said senior economist Bob Schwartz of Oxford Economics.The bank estimates barely any economic growth in 2022 and a sluggish economy in 2023. Unemployment is also forecast to rise to 4.4% next year from the current level of 3.5%.
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