JPMorgan Chase Survey: Most Businesses Expect Recession in 2023

Continued pricing pressures and economic headwinds fuel recessionary predictions, while inflation remains a top challenge facing small and midsize businesses

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% of midsize businesses and 61% of small businesses expect a recession in the year ahead.

The heightened recession expectations come as businesses nationwide continue to combat inflation. Nearly all midsize businesses (91%) are experiencing inflation challenges, while 45% of small businesses list inflation as a top challenge for the year ahead, up from 20% 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, including:

• Passing Costs onto Consumers: 83% of midsize businesses have passed at least some increased costs onto consumers and buyers, while 68% of small businesses have raised prices on select or all products and services.
• Rising Business Expenses: 94% of small businesses say inflation has impacted expenses, with 38% noting that expenses have increased by 11% 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% 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,” said Ginger Chambless, head of research, 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.”

Mixed Economic Views

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% from 34% one year ago and the number optimistic about the national economy fell to 22% from 50% 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% and 45%, respectively, which is similar to last year’s sentiment.

High Performance Expectations

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

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

“Following the challenges of the last few years, it’s encouraging to see the resilience of small business owners and leaders,” said Ben Walter, CEO, 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.”

Help Still Wanted

Concerns of a recession and dimmed economic outlooks largely aren’t restraining 2023 hiring plans, as 51% of small business leaders anticipate hiring full-time employees and 50% of midsize business leaders expect to increase headcount. To hire and retain employees, 67% of midsize businesses plan to increase wages and/or benefits and 43% plan to offer upskilling and training opportunities, while 42% 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,” said John Simmons, head of Middle Market Banking & Specialized Industries, 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.”

New Year’s To-Do List

Businesses may consider focusing on the following considerations in their 2023 planning:

1. Stay In-Tune with Economic Trends: While business leaders are undoubtedly familiar with today’s top economic headlines, they will want to keep a close eye on whether current trends related to the Federal Reserve, consumer spending, inflation, labor markets and more continue, abate or reverse in the year ahead. Learn more here.
2. Recession-Proof Your Business: Regardless of when or if a recession ultimately materializes, businesses can take steps today to remain flexible, bolster their balance sheet and even find opportunities amid volatility. Learn more here.
3. Optimize Working Capital: Working capital is a key indicator of businesses’ financial health, and maintaining it is even more crucial in times of economic volatility. To manage working capital more effectively, businesses may want to consider utilizing supply chain finance and dynamic discount solutions, implementing more efficient inventory management and reworking current debt to reduce liabilities. Learn more here.

For more information on the Business Leaders Outlook survey, please view the midsize and small business reports.

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Survey Methodology

JPMorgan Chase’s Business Leaders Outlook survey was conducted online from November 14-22, 2022, for small businesses (annual revenues between $100,000 and $20 million) and from November 29 – December 13, 2022, for midsize businesses (annual revenues between $20 million and $500 million). In total, 1,799 business leaders in various industries across the U.S. participated in the survey. For year-over-year trends, current data is compared to data collected in the fourth quarter of previous years. The results of this online survey are within statistical parameters for validity, and the error rate is plus or minus 3.1% for the small business findings and plus or minus 3.5% for the midsize business findings, both at the 95% confidence level.

About JPMorgan Chase

JPMorgan Chase & Co. (NYSE: JPM) is a leading financial services firm based in the United States of America (“U.S.”), with operations worldwide. JPMorgan Chase had $3.8 trillion in assets and $288 billion in stockholders’ equity as of September 30, 2022. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S., and many of the world’s most prominent corporate, institutional and government clients globally. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

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