A survey of corporate executives, business owners, and private equity by Stifel Financial reveals that nearly all respondents believe the U.S. economy is either already in a recession (18%) or will face one within the next 18 months (79%). Only 3% of the executives surveyed think a recession will be avoided. 

Despite the gloomy outlook, respondents acknowledged the U.S. labor market remains especially strong, with unemployment hovering near historic lows. For the second straight year, survey respondents considered labor constraints (64%) the biggest perceived threat to business, followed by inflation (59%), and a recession (54%).

Two-thirds (68%) of executives said they are increasing investments in technology and automation as a way to help mitigate labor shortages, and 41% are increasing emphasis on acquisitions that promote better efficiency.

Fifty-three percent of respondents believe that inflation will be an issue for the next two quarters to a year, with another 43% expecting elevated prices will persist for even longer. Half of respondents were “very concerned” about inflation, compared to just 33% who felt the same way one year ago. An overwhelming 81% are primarily passing rising costs on to consumers instead of absorbing costs in profit margins, cutting overhead, or changing suppliers more.

“Corporate executives’ dire forecasts about a recession are what you would expect to hear, given all the harbingers of an economic downturn that surround us at the moment. That said, their capital expenditures plans indicate that they will continue to spend through a recession to maximize their companies’ profitability, which is a good sign for investors who want to capitalize on a share price recovery when economic growth stops slowing,” said Caleb Silver, Editor-in-Chief of Investopedia.