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Two-thirds of CFOs say recession will hit the US within the next 12 months

A recent survey of CFOs found that most believe a recession will hit in the next 12 months, and no one believes the US economy will escape a downturn.

The CNBC CFO Council Survey released Thursday found that 68 percent of CFOs who responded to the survey predicted a recession will hit in the first half of 2023.

No CFO predicted a recession later than the second half of next year, and no CFO surveyed thinks the economy will avoid a recession.

It marks the latest warning sign that the US economy could be heading for a precipice after a period of explosive growth, as rising energy costs and Federal Reserve rate hikes weigh on expansion.

The Dow is down 10% since the start of the year and most CFOs believe it will fall further as they forecast a recession in the first half of next year

The Dow is down 10% since the start of the year and most CFOs believe it will fall further as they forecast a recession in the first half of next year

Traders can be seen on the NYSE earlier this month.  Markets are nervous about the growth outlook as many experts now predict a recession in the next 12 months

Traders can be seen on the NYSE earlier this month. Markets are nervous about the growth outlook as many experts now predict a recession in the next 12 months

The CNBC survey found that more than 40 percent of CFOs cite inflation as the biggest external risk to their business, and nearly a quarter cite Federal Reserve policies as the biggest risk factor.

In an effort to curb inflation, the Fed has raised its key rate by 75 basis points since March and has begun to trim its $9 trillion balance sheet by selling bonds it bought during the COVID-19 pandemic.

The Fed is expected to raise overnight interest rates by half a percentage point at each of its next meetings this month and in July.

Just over half of the CFOs surveyed expressed confidence that the central bank will succeed in controlling inflation, but that did not change their view that the economy was heading for a recession.

Warning signs about the US economy have been mounting in recent weeks, after gross domestic product unexpectedly shrank by 1.5 percent in the first quarter.

A second consecutive quarter of negative GDP growth would mark an official recession, but so far most economists still believe a downturn won’t hit until 2023.

The US economy contracted unexpectedly in the first quarter, falling 1.5 percent, partly due to a widening trade deficit

The US economy contracted unexpectedly in the first quarter, falling 1.5 percent, partly due to a widening trade deficit

In April, consumer prices rose 8.3 percent from a year earlier, just below the fastest increase in four decades, a month earlier

In April, consumer prices rose 8.3 percent from a year earlier, just below the fastest increase in four decades, a month earlier

Earlier this week, the World Bank cut its global growth forecast by nearly a third for 2022, warning that the risk of 1970s-style “stagflation” is increasing and many countries are now in recession.

“The danger of stagflation is significant today,” wrote World Bank President David Malpass in the foreword to Tuesday’s report, which cut global growth forecasts for 2022 to 2.9 percent.

The International Monetary Fund also expects to further lower its forecast for global economic growth in 2022 next month, IMF spokesman Gerry Rice said on Thursday.

That would mark his third downgrade this year. In April, the IMF had already lowered its forecast for global economic growth by almost a full percentage point to 3.6 percent in 2022 and 2023.

Rice told a regular IMF briefing that the general outlook still favors growth around the world, albeit at a slower pace, but warned that a number of countries could face a recession.

JPMorgan Chase CEO Jaime Dimon also issued a stark economic warning last week, saying that rising commodity prices and a tightening monetary policy could be a “hurricane” blow to the US economy.

Speaking at a New York banking conference on Wednesday, Dimon warned the investor-analyst meeting, “You’d better brace yourself.”

“I said there were storm clouds there, big storm clouds, but it’s a hurricane,” the US banking giant said.

“Right now it’s a bit sunny, it’s going well, everyone thinks the Fed can handle this. That hurricane is over there, on the road, coming our way. We just don’t know if it’s a small or Super Storm Sandy,” he added.

“JP Morgan is bracing ourselves and we will be very conservative with our balance sheet,” he said.

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