Economic Warning Signs



Economic Warning Signs – Report from Mike Austin, SBDC

There have been several economic reports and polls released in recent days that could bode ill for small businesses in the months ahead. These include:

Stagflation: an economic condition where employment and income levels decrease or decline, and price inflation continues.

  • 77% of investment fund managers believe that slowing growth and high inflation will take hold over the next year
  • 68% of those polled indicate that the global CPI will fall during the next 12 months
  • 72% of respondents to a BofA survey believe that the US and global economies will weaken during the next year
  • Recent record profit reports from major corporations will not continue in the future. Fully 2/3rds of money managers polled believe that profits will fall in future periods

Consumer Spending may be running dry:

  • The US economic engine is fueled by consumer spending
    Several large retailers (Amazon, Walmart, Target), posted significantly lower profit margins than in 2021
  • The President of the St. Louis FED believes that “retailers who don’t understand that consumers are stretched thin by inflation are going to get punched in the face”
  • Retail CEOs are making a mistake by thinking they can raise prices and make unlimited profits on the backs of consumers
  • Eventually, consumer buying habits will change as they end up purchasing necessities vs. luxury goods
  • Although this will cause pain in the short-term, in the longer term, this could lessen inflation

American consumers are becoming more pessimistic:

  • Consumers are more frustrated with the state of the US economy
  • 60% of those polled agree that the state of the nation’s economy is “uneasy”
  • 60% of respondents believe that the economy is bad, up from 46% in the spring
  • Almost all respondents urge all political candidates to concentrate on inflation
  • The US economy has entered a state of flux following a significant recovery following the pandemic

These polls and surveys continue to indicate that the future of the US economy is at best “uncertain”. In addition to the traditional indices that have impacted past economic growth, the ongoing conflict in Ukraine and the continued supply chain issues in China due to COVID will undoubtedly impact our economy in multiple ways in the months ahead. The American consumer, the driver of our economy, can be exceedingly “wishy-washy”. Small business owners that rely on consumers for their livelihoods must remain vigilant in the months ahead or they may not continue to operate.