“People are still spending”: Small business owners worry about a recession, but many are confident they will survive a recession. Here’s why

Small business owners say they need to add one more item to their worry list: recession.

According to a new survey by online business banking platform Kabbage, a checking account service operated by American Express AXP, more than four in five small business executives say they are concerned a recession will soon hit the economy and affect their business will affect companies.

The survey is the latest edition of Kabbage’s Small Business Recovery Report. In early April, responses were collected from 550 small business owners with fewer than 500 employees across a variety of industries.

The small business owners are not alone. Wall Street Forecasters by JP Morgan & Chase JPM,
CEO Jamie Dimon and Goldman Sachs GS,
CEO David Solomon and investor Michael Novogratz foresee economic storm clouds as the Federal Reserve seeks to achieve a “soft landing” while taming inflation. A Financial Times poll conducted in early June showed that a majority of economists predicts a recession to begin in 2023.

The US economy shrank in the first quarter of the year and is expected to grow less than 1% in the second quarter, according to Wall Street estimates. Some economists have predicted that this trend points to further signs of an impending recession, defined as two consecutive quarters of slowing economic growth.

By the end of May, the cost of living had risen by 8.6% year-on-year. With inflation at a 40-year high, the central bank has implemented a series of rate hikes that could take the federal funds rate between 3.25% and 3.5% by the end of the year. by bank rate, a personal finance website. The Fed had kept interest rates near zero since the start of the coronavirus outbreak to encourage economic activity.

After the latest rate hike of 75 basis points, it is becoming more expensive to take out a business loan. Businesses face a double-edged sword: Among small businesses that have applied for a loan or plan to do so in the next six months, nearly half said the money is intended to help pay for inflation-related costs, according to the Kabbage survey.

However, Kabbage also noted that small business owners may be learning lessons from the pandemic to prepare for a recession. Around 80% of respondents are confident their business will weather a potential recession, citing the main reason for this is that the pandemic has helped them develop a greater sense of resilience and prepare for the economic turmoil ahead.

“Small businesses are traditionally bullish during tough times because they like to make the changes necessary to persevere,” said Gina Taylor Cotter, executive vice president and general manager of US Small Business Banking at Kabbage. She said various economic factors have prompted small businesses to prioritize branding, marketing and e-commerce to differentiate themselves from the competition.

“If there is a recession, hopefully it will be a mild one because the fundamentals of the economy are pretty good,” said Holly Wade, executive director of the National Federation of Independent Business (NFIB) Research Center during a recent NFIB event. “People are still spending money. Most people who want a job have a job. All of these factors are very different from the 2007 financial crisis when we had a housing bubble and other fundamental problems.” “People are still spending”: Small business owners worry about a recession, but many are confident they will survive a recession. Here’s why

Brian Lowry

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