Bank of America Corp.’s midsize-business clients are signaling optimism about their future growth, adding to hopes for a soft landing after months of dire warnings that a US recession is looming.
(Bloomberg) — Bank of America Corp.’s midsize-business clients are signaling optimism about their future growth, adding to hopes for a soft landing after months of dire warnings that a US recession is looming.
About 75% of medium-size businesses surveyed by Bank of America in May expect their revenue to increase, and 71% plan to hire. Almost all plan to get funding for their plans over the next 12 months, according to the survey of more than 300 business owners.
“The companies we serve continue to feel optimistic,” Raul Anaya, the company’s president of business banking, said in an interview. Bank of America works with almost 25,000 midsize businesses, which have annual revenue of $5 million to $50 million. “As the soft landing materializes and there is better clarity on the economy and future growth of the US, that will allow businesses to make more investment decisions against a safer backdrop.”
Hopes for a soft landing — with the Federal Reserve quelling inflation through interest-rate hikes, while the economy avoids a recession — are rising after encouraging signs that price increases may be under control. Still, the majority of business owners see issues remaining, including inflation, spurring them to raise prices or re-evaluate their cash flow and spending, the Bank of America survey results show. Some 75% of midsize-business owners cited inflation as a concern.
Bank of America isn’t alone in its expectations that a serious recession could be dodged, with other financial firms reporting that consumers are continuing to spend their excess cash and have kept debt under control.
“Even if we go into a recession, they’re going in with rather good conditions, low borrowings and good house price value still,” JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said on an earnings conference call earlier this month.
Still, headwinds are “substantial and somewhat unprecedented,” he cautioned, including the war in Ukraine, oil and gas prices and quantitative tightening. “We don’t know that those things could put us in a soft landing, a mild recession or a hard recession.”
While expectations are currently for a soft landing for the global economy, the narrative has switched back and forth during the year, said Alex Brazier, deputy head of BlackRock Inc.’s Investment Institute and a former member of the Financial Policy Committee at the Bank of England.
“A lot has to go right for that, and the risks are in one direction, but it could carry on for some time,” he said in a Bloomberg Television interview Tuesday.
Federal Reserve Chair Jerome Powell said during a press conference Wednesday afternoon that Fed staffers are now forecasting a “noticeable slowdown in growth starting later this year,” but aren’t expecting a more painful impact.
“Given the resilience of the economy recently, they are no longer forecasting a recession,” he said.
Increased optimism about the economy should translate into company owners spending on expansion and hiring more employees, Bank of America’s Anaya said.
“When there is volatility in the economy and things get fuzzy, businesses tend to slow down with future investments until they understand what the future holds for them,” he said.
(Updates with Powell’s comments in 10th, 11th paragraphs.)
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