Preparing for an Inevitable Recession: 75% of Americans Worry About 2023
With economists having trouble predicting when a recession will hit, many Americans are bracing for the inevitability of one. A Real Estate Witch poll found that 75% of Americans worry a recession will occur in 2023, and 69% believe one is already here. Economists, too, are expecting a recession in the next 12 months, according to a survey by the National Association for Business Economics.
The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” To be declared a recession, three criteria must be met to some degree: depth, diffusion, and duration.
To combat the destructive power of high inflation, the U.S. Federal Reserve has raised interest rates 4.5 percentage points since March 2022. While the Fed’s February meeting saw the smallest increase since March 2022, a new round of data signaled that inflation isn't under control yet. In December, half of the forecasters thought a recession would start by the end of March. However, according to The Conference Board, a recession is more likely to start in the first quarter of the year and become more pronounced in the second quarter. It’s estimated that the Fed’s key interest rates may rise to 5.5-5.75 percent before it’s all said and done.
Consumer spending is greatly impacted by inflation. Due to increasing prices, individuals have to allocate more of their money towards essential items, leaving them with less for discretionary purchases. According to a survey by the National Retail Federation, 55% of US consumers are cutting back on spending due to higher prices, and 64% are changing the way they shop. A decrease in consumer confidence and a decrease in economic activity can result from this trend.
Due to increasing interest costs, businesses will be faced with greater financial burdens when taking out loans, managing current operations, and investing in new development opportunities. Bonds and other fixed-rate investments tend to see higher yields, thus causing stocks to offer less preferable risk-reward profiles compared to them.
Nearly half of Americans believe we’re already in a recession, according to a recent survey, and almost as many have actively started preparing for one. A survey that had responses from over 2,200 U.S. citizens was conducted.
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