Recession drumbeat grows across corporate America

United Airlines flagged plateauing demand, indicating 'pre-recessionary behaviour'

Corporate America is starting to feel the chill of a looming recession as top executives from companies such as JPMorgan Chase, retailing giant Walmart, and United Airlines paint a grim economic picture for the coming year.

A survey by the Business Roundtable of top US CEOs this week showed companies were planning to slow down hiring and capital investments for the next six months as borrowing costs rise sharply.

The US Federal Reserve's relentless war on inflation, which is at a multi-decade high, through aggressive rate hikes is roiling the economy and forcing companies to lower their earnings forecasts and rein in expenses.

JPMorgan chief Jamie Dimon warned of a "mild to hard recession" next year as a slowing economy and runaway inflation hurt consumer spending, while Scott Kirby, his counterpart at United Airlines, has flagged plateauing demand for air travel, indicating "pre-recessionary behaviour," in interviews. 

"Cautious CEO commentary about the 2023 outlook is logical at this juncture with so much uncertainty around how much the Fed's battle against inflation will slow the economy," said Arthur Hogan, chief market strategist at B. Riley Wealth.

Some of the largest American banks are already sounding alarm bells on the economy in their client notes, with a few predicting a slowdown, while others are signaling an outright recession.

A Reuters poll of economists published this week showed that US economic growth was expected to slow to 0.3% in 2023 following a 1.9% rise this year. It also suggests a 60% chance of a US recession next year.

Tesla CEO Elon Musk said in October a recession would last until the spring of 2024. Walmart CEO Doug McMillon told CNBC a downturn might be the necessary evil to ease inflation for his customers, who are more budget conscious.

A Wall Street Journal report said Pepsi is looking to lay off hundreds of workers in headquarter roles, potentially joining a list of corporations, from tech majors to consumer firms that are reducing headcount to rein in costs as they brace for the uncertain outlook.

Signs of a recession are driving American companies and brokerages that cover them to dial down profit expectations, with S&P 500 firms likely to see their first decline in earnings in two years in the fourth quarter. 

Reuters