A Little Recession Talk!
FINANCE CHIEFS ARE OPTIMISTIC ANY RECESSION WILL BE SHORT, BUT CHALLENGES REMAIN
Finance chiefs are coming into the year grappling with a variety of challenges, from rising interest rates and inflation to managing labor disruptions, pricing and inventory. Yet many have cautiously optimistic outlooks.
While pockets of the economy are weak and highly indebted companies may face financing difficulties and default risks in the current environment, panelists at The Wall Street Journal’s CFO Network Summit on Wednesday said companies in healthy sectors should be able to slog through any headwinds.
“All our clients…have been preparing for a downturn in the economy,” said Carmine Di Sibio, global chairman at Big Four accounting firm Ernst & Young. “But…there’s more and more of a belief that any kind of downturn will be short and shallow, frankly. That seems to be taking over you know what was five or six months ago a very, very negative outlook.”
With executives largely optimistic any downturn will be brief, Federal Reserve Bank of New York President John Williams opened the day’s discourse by saying the economy will need higher borrowing costs for a few years to bring down inflation and prevent price pressures from strengthening.
Fed officials generally expect rates to reach between 5% and 5.5% this year.
LABOR WOES PERSIST
Hiring, however, remains a challenge for finance chiefs. U.S. job growth accelerated at the start of the year, with employers adding 517,000 jobs in January and pushing the unemployment rate to 3.4%, a more than five-decade low.
CAPITAL-RAISING DIFFICULTIES
Some companies are also finding it difficult to raise capital, in part for acquisitions, as the Fed continues to increase interest rates.
These challenges are motivating some businesses to rely more heavily on private credit, which is playing a more prominent role in large-scale transactions, as opposed to traditionally mid-sized deals, Ms. Katz said.
EXPANDED CLIMATE DISCLOSURES
The Securities and Exchange Commission’s proposal to expand public companies’ climate-related disclosures has been contentious, even within the agency. The commission might back off somewhat, particularly on its proposed Scope 3 requirement that some companies provide disclosures on emissions up and down their supply chains, said Kelly Gibson, former leader of the climate and environmental, social and governance task force at the SEC’s enforcement division.
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