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From CNN:

Why recession fears are back: Americans are losing faith

From the executive suite to the grocery aisles to the halls of the Federal Reserve, the big question is: Can red-hot inflation be vanquished without tipping the economy into a recession?

Ironically, all this talking about a recession can actually help cause one. How people feel is a huge driver of consumer behavior and business planning. The famous British economist John Maynard Keynes coined the phrase “animal spirits” to describe what drives investors, consumers and business leaders. Fear, hope, uncertainty, and confidence are all hard to measure — and hugely important to how the economy fares.

Essentially, worrying about a recession and planning for one can be a self-fulfilling prophecy.

“At the end of the day, a recession is a loss of faith,” said Mark Zandi, chief economist at Moody’s Analytics. Consumers worry about losing a job and so pull back on spending, and business leaders worry their sales will decline and start laying off workers. 

“You get into this kind of self-reinforcing negative cycle,” he told CNN’s Early Start. “So when sentiment is this bad and starting to feed on itself, we run the risk of talking ourselves into one.”

The US economy grew at a 2.9% annual rate in the third quarter, and the unemployment rate is near a 50-year low. That’s not going to last. The Federal Reserve this week lowered its forecast for growth in the United States next year to just 0.5% and a jobless rate rising to 4.6% by the end of 2023.

“Look, we’re planning as if there’s going to be a mild recession next year,” United Airlines CEO Scott Kirby told CNN This Morning. “And a lot of people in the business world are trying to talk ourselves into one is what it sometimes feels like to me.”

But he added, “If I didn’t watch business shows or read the Wall Street Journal, the word recession wouldn’t be in my vocabulary because we just don’t see it in our data.”

Federal Reserve Chairman Jerome Powell and plenty of economists — including Treasury Secretary Janet Yellen — still see a path to a so-called soft landing, where the economy slows enough to lower inflation but not cause a recession. Yellen explained this week that recession risks permanently exist.

“There are always risks of a recession,” Yellen told CBS’s “60 Minutes” in an interview that aired on Sunday. “The economy remains prone to shocks.”

But Zandi said there can be a bright side to the dark worries.

“It may just, in an odd kind of way, help things out because if everyone’s so nervous about recession, they are cautious,” he said. “They don’t take big risks. They don’t take on a lot of debt. They don’t go out and make big expansion moves (and) that may cool things off sufficiently to bring inflation down so that (the Fed) doesn’t have to raise rates as much and we actually — weirdly enough — avoid a recession.”

From Motley Fool:

98% of CEOs Expect a Recession in 12-18 Months

Uncertainty has been one of the few consistent themes of recent years. It’s not surprising given that we’re still navigating the aftermath of what was an unprecedented pandemic. However, uncertainty isn’t good for the economy and it’s one reason so many CEOs think a recession could be in the cards.

Dana Peterson, chief economist at the Conference Board, told CNBC this week that 98% of the CEOs it surveyed are preparing for a recession, up from 95% earlier this year. She explained that Federal Reserve’s interest rate hikes are a major factor.

The Fed is trying to get inflation under control, and one of the tools it has at its disposal is to raise rates. This makes borrowing more expensive, and, in theory, will slow the economy down. But the side effect of that economic slowdown is the increased potential of triggering a recession. And unfortunately there’s a time lag between increasing rates and any corresponding slowdown, so it’s difficult for the Fed to know when it’s done enough.

We’ve seen some of the most aggressive rate hikes in recent U.S. history this year. As a result, CEO confidence is failing and many business leaders are preparing for difficult times. It’s not only CEOs, consumers are concerned as well. “Consumers are starting to worry about their personal finances, they’re hearing bad news about companies, and they’re concerned about their own job prospects,” said Peterson.