Recession fears are in full swing with stocks plunging and consumers sour on the economy. It’s a far cry from just a few months ago, when the stock market was still climbing and many business executives were optimistic about President Trump’s tax cuts and deregulation. Now, with the stock markets crashing and confusion about the future of tariffs, economists are sharply cutting their growth estimates for this year and some are saying that the risk of a recession is rising.
While there are a variety of economic indicators that could signal a recession, such as slowing GDP growth, rising unemployment, or an overheated stock market, most recessions are preceded by signs that consumer confidence is declining and businesses are feeling the pinch. In the past, those signs have included a surge in Google searches for “recession,” higher bankruptcy filings and spreading homeless encampments.
The most recent early warning sign is the Atlanta Fed’s real-time economy tracker, which turned negative last week after a sharp downshift in data. The tracker is not a forecast, but rather a running tally that adjusts as new information comes in. It currently shows a 99% chance that the economy will shrink this quarter and a 50% chance that it will contract over the next 12 months.
While a recession isn’t imminent, it’s important for boards and management teams to stay tuned in and prepare for slower growth ahead. The best way to do that is by identifying any discretionary expenses or overhead you can trim without jeopardizing long-term growth plans.
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