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Corporate Finance Execs Split On Threat Of Economic Recession

Corporate finance executives and economists are juggling a lot in today’s period of market volatility — and more change is on the way. In the U.S., talk of an economic recession has some analysts worried, but not everyone is convinced the threat will turn to reality.

For some experts, recent regulatory efforts to boost the business community and support the national economy haven’t been enough to prevent a recession.

“In spite of a strong U.S. economy, a corporate tax cut that helped banks earn record profits in the second and third quarters of 2018, and enactment of regulatory relief legislation, bankers have become increasingly pessimistic about the future,” said Promontory Interfinancial Network Co-founder and CEO Mark Jacobsen in a statement last week, announcing the new survey results on the topic.

Separate analysis from Forbes noted that marketers are also joining some economists in feeling the pressure from what they predict to be an upcoming economic downturn, with chief marketing officers (CMOs) now taking on the burden of “doing more with less” this year, reports said.

On the other hand, a CNBC Global CFO Council Survey, also published this past week, found that corporates’ own chief financial officers are far from convinced that an economic recession is in the near future.

“If you’re looking for trillions of dollars making the bet that a recession is coming sooner rather than later for the U.S. economy, don’t look to major corporations,” the publication wrote.

Indeed, while the U.S. Federal Reserve has expressed some concerns about the economy, pointing to the global economic slowdown as the reason why it tapered back interest rate hike plans, current economic conditions are seen as “healthy” by the Fed, according to Chairman Jerome Powell, who spoke last week in U.S. Senate testimony. Still, despite a “favorable” economic outlook, the Fed has “seen some crosscurrents and conflicting signals … financial conditions are now less supportive of growth than they were earlier last year.”

Below, PYMNTS breaks down the data behind the opinions of economists, CFOs and other finance experts, and expectations on the U.S. economy.

Two percent: the probability that the U.S. is already in a recession, assigned by the median respondent of a Federal Reserve survey. The median respondent assigned a 12 percent probability that the U.S. will be in a recession within six months. The New York Federal Reserve reported these survey findings last month, CNBC noted. When asking survey participants when they believed a U.S. recession might occur, the highest probability landed on 2020 or 2021.

According to CNBC, 91.3 percent of CFOs don’t believe the U.S. economy will experience a recession this year, while nearly half said the same about the European Union’s economy. CFOs have less confidence about the U.S. stock market, however, while they also anticipate positive impacts from U.S. tax reform to wear off over time.

None of the CFOs surveyed by CNBC expect the Fed to cut interest rates this year, while only 17 percent said they predict the Fed to raise rates at least twice. Nearly half said they expect the Fed to raise rates at least once in 2019, and 30 percent aren’t expecting any rate increases or cuts.

Fifty-seven: the average ranking among chief marketing officers in their U.S. economic optimism scale, from one to 100, according to Forbes. That marks a 21 percent decline from this time last year, with 56.2 percent of CMOs reporting they feel less optimistic this year than last. Nearly half (48.6 percent) predict the U.S. economy to hit a recession by the end of this year.

Seventy-one percent of bank presidents and CFOs said they believe a recession won’t come until 2020 at the earliest, though 25 percent told the Promontory Interfinancial Network that they expect a recession to happen in the second half of 2019. While some economists have raised concerns about growing corporate debt in the U.S., less than one-third of bank executives surveyed said they feel their current corporate debt levels are bad for business. Most, however, said it has no impact or is actually good for business.

Eleven percent of economists expect the U.S. to avoid a recession until at least 2022, found a new report from the National Association for Business Economics. Roughly half, however, expect a recession will hit the U.S. by the end of 2020, with three-quarters anticipating a recession by the end of 2021.

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