The majority of small and midsize U.S. business leaders anticipate a recession in 2023, according to JPMorgan Chase’s 2023 annual Business Leaders Outlook survey released today.
In total, 65 percent of midsize business leaders and 61 percent of small businesses leaders expect a recession in the year ahead.
The heightened recession expectations come as businesses nationwide continue to combat inflation. Nearly all midsize businesses (91 percent) are experiencing inflation challenges, while 45 percent of small businesses list inflation as a top challenge for the year ahead, up from 20 percent one year ago.
According to the report, inflation has forced small and midsize businesses to re-evaluate approaches to pricing, sourcing materials, and running operations, including:
Passing Costs onto Consumers: 83 percent of midsize businesses have passed at least some increased costs onto consumers and buyers, while 68 percent of small businesses have raised prices on select or all products and services.
Rising Business Expenses: 94 percent of small businesses say inflation has impacted expenses, with 38 percent noting that expenses have increased by 11 percent 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.
Bracing for Longer-Term Increases: 82 percent of midsize businesses are likely to continue to increase prices to mitigate costs, while the majority of small businesses expect that higher costs for labor, rents, shipping, and materials are here to stay.
“Inflation has been a challenging headwind impacting businesses of all sizes, across all industries,” says Ginger Chambless, head of research for JPMorgan Chase Commercial Banking. “While we have seen some encouraging signs that inflation has started to moderate and should cool over 2023, businesses may still want to consider adjustments to strategies, pricing or product mixes to help weather the storm in the near-term.”
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 percent from 34 percent one year ago and the number optimistic about the national economy fell to 22 percent from 50 percent 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 percent and 45 percent, 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 percent of small businesses and 66 percent of midsize businesses expressing optimism for the year ahead. More than two-thirds (69 percent) of small businesses expect increased revenue and sales in the year ahead and 65 percent anticipate greater profits in 2023. Similarly, 63 percent of midsize businesses expect increased revenue and sales in 2023, and 51 percent predict greater profits.
“Following the challenges of the last few years, it’s encouraging to see the resilience of small business owners and leaders,” says Ben Walter, CEO of Chase Business Banking. “The next economic cycle is always right around the corner, so our role is to help small business owners plan ahead so they can succeed in good times and bad.”
Concerns of a recession and dimmed economic outlooks largely aren’t restraining 2023 hiring plans, as 51 percent of small business leaders anticipate hiring full-time employees and 50 percent of midsize business leaders expect to increase headcount. To hire and retain employees, 67 percent of midsize businesses plan to increase wages and/or benefits and 43 percent plan to offer upskilling and training opportunities, while 42 percent of small businesses expect to increase wages. Small businesses’ primary drivers for full-time hiring plans include expected sales growth and improved financial positions.
“While businesses may be cautious in their economic outlooks, their actions display a focus on growth and investing in their employees,” says John Simmons, head of middle market banking and specialized industries for JPMorgan Chase Commercial Banking. “Businesses are signaling that they’re practiced in being nimble and prepared for several different scenarios, which are keys to operating effectively in today’s economy.”
