Inflation hasn't peaked yet, CFOs say, and the recession is here or will hit them soon

Inflation hasn’t peaked yet, CFOs say, and the recession is here or will hit them soon

A woman buys oat milk at a supermarket in Santa Monica, California on September 13, 2022.

Apu Gomes | AFP | Getty Images

At the CNBC Delivering Alpha Investor Summit in New York on Wednesday, several big names in the investment community said they see no sign of inflation abating.

David Rubenstein, co-founder and co-chairman of the Carlyle Group, said that while we’ve been used to 2% inflation for the past 25 years, we have to get used to the fact that inflation won’t be 2% anytime soon,” adding that “it’s taking a long time for that Paul Volcker will get out of the system.”

“This inflation is here to stay,” said JPMorgan Asset & Wealth Management CEO Mary Callahan Erdoes.

Many CFOs at leading companies share the view that inflation has not yet peaked, according to the results of CNBC’s latest quarterly CFO Council survey.

A majority of CFOs (57%) said they did not think inflation had peaked. More than a quarter of CFOs say inflation is the biggest external risk factor facing their business. That’s down from 40% who cited inflation last quarter as concerns about consumer demand in a softening economy rose among CFOs, with others now citing it as their No. 1 risk.

The CNBC CFO Council survey is a snapshot of the current outlook among CFOs. It took place between 21 CFOs of large organizations between September 12 and 27. Board membership includes 44% of CFOs from Fortune 500 companies, and of that cohort, half from Fortune 100 companies.

In recent weeks, managers from companies across the economy have joined this view of inflation. Costco CEO Craig Jelinek told CNBC’s Jim Cramer on Sept. 13, “I think you’ll see maybe the next six months to a year, things will start to come down.”

Unilever CEO Alan Jope said on CNBC’s “Closing Bell” on Sept. 6: “We don’t see any moderation in our costs. So any early optimism that inflation has peaked is misplaced.”

At a press conference on September 21 after the Federal Reserve raised key interest rates by another three-quarters of a percentage point, Fed Chairman Jerome Powell said that while the Fed “expected that we would start to see inflation come down … inflation has come down.” don’t really get off.”

With inflation lingering, CFOs have changed their view of the timing of the recession in the wake of the Fed’s rate hikes.

Almost half (48%) of CFOs surveyed said they expect a recession in the first half of 2023, down from the previous quarter’s survey, when 68% said the first two quarters of next year were the most likely to start a recession, as more CFOs shift recession expectations closer in time. Nineteen percent of CFOs now say they expect a recession in the fourth quarter of this year, up from 13% in the second quarter. Additionally, another 19% of CFOs said the U.S. economy is now in recession.

Deputy Treasury Secretary Wally Adeyemo told CNBC’s Ylan Mui on Delivering Alpha that the Biden administration is doing everything it can to fight inflation to avoid a recession.

“Consumer confidence is still high. Consumer and business balance sheets are healthy. We have great momentum in the labor market, with an average of more than 300,000 job gains over the past three months,” he said.

A CNBC survey found that companies are still in hiring mode, with 57% of CFOs saying they expect headcount to increase over the next year. Less than 10% expect to reduce the number of employees.

Overall, CFOs surveyed in CNBC’s CFO Council survey support the Fed’s policy actions to get inflation under control, with more than half (52%) saying its efforts have been fair, while 19% say they have been good. About 29% said the effort was weak.

“We’ve always understood that restoring price stability while achieving a relatively modest decline, or rather, an increase in unemployment and a soft landing, would be very challenging, and we don’t know, nobody knows whether that process will lead to a recession or whether So how significant that recession would be,” he said Powell at his last press conference after the Fed meeting. “That will depend on how quickly wage and price inflationary pressures come down, whether expectations remain anchored and whether we also get more labor supply, which would also help.”

Stanley Druckenmiller says he would be

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