'People are still spending money': Small-business owners worry about a recession, yet many feel confident they will survive one. Here's why

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Interest rate hikes, persistent inflation, a labor shortage and supply-chain disruptions are all adding to the challenges faced by small businesses.

More than four in five small business leaders say they worry that a recession will hit the economy soon and it will impact their businesses, according to a new survey by online business-banking platform Kabbage, a checking-account service by American Express AXP, -0.26%.

The small business leaders aren’t alone. Wall Street forecasters from J.P. Morgan & Chase JPM, -0.56% CEO Jamie Dimon and Goldman Sachs GS, -0.09% CEO David Solomon to investor Michael Novogratz see economic storm clouds ahead as the U.S. Federal Reserve attempts to engineer a “soft landing” while simultaneously taming inflation. A Financial Times survey conducted in early June showed that a majority of economists predicted a recession will begin in 2023.

As of the end of May, the cost of living had risen by 8.6% compared to a year ago. With inflation at a 40-year high, the Central Bank has implemented a series of interest-rate hikes that could put the federal funds rate between 3.25% and 3.5% by the end of the year, according to Bankrate, a personal-finance website. The Fed had kept interest rates at close to zero as a way to incentivize economic activity since the beginning of the coronavirus outbreak.

Still, Kabbage also found that small-business owners may be drawing lessons from the pandemic to help them prepare for a recession. Around 80% of respondents are confident about their business surviving a potential recession, and said the top reason they feel that way is that the pandemic has helped them find a greater sense of resilience and to prepare for any upcoming economic turbulence ahead.

 

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