Ongoing supply chain issues, increasing interest rates to battle inflation, and overall poor stock market performance in 2022, are likely leading to an inevitable recession.
A new survey from J.P. Morgan Chase also echoes these expectations of recession. The survey was conducted among business leaders of small- and mid-sized sized businesses (SMEs) in the U.S. According to the research, 91% of respondents are battling the effects of inflation, with 45% of small businesses listing inflation as their top challenge. Higher prices not only increase operational costs, but concurrently reduce consumer demand. What’s more, higher costs and lower sales don’t make for a promising business environment. This also reflects some other survey data that we have seen during 2022 that shows how businesses are passing through costs to their corporate clients and consumers as well, further pressuring supply chains.
Given these realities it’s not surprising that mid-sized businesses are quite pessimistic about global economic conditions, with only 8% expressing optimism, although there is more positivity when assessing their own company’s performance expectations, with 66% seeing some good potential for 2023.
The survey breaks out small- and mid-sized with the smaller companies showing higher optimism than mid-sized, which may seem a bit surprising given the nature of more cash-strapped small businesses.
Moving on to the resource part of the equation, the survey indicates that roughly half of the respondents expecting to increase staffing, fueled by higher wages and skills training. While some of these findings may seem contradictory, we might speculate that the nimbleness that many businesses have had to demonstrate during the pandemic/post-pandemic timeframe creates a sense of confidence in overcoming adversity.
There are some brief recommendations for 2023, including improved working capital utilizing supply chain finance, something that we have been espousing in member research as well.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.