Community bankers: Recession already underway

The vast majority of community bankers believe the U.S. economy is already in a recession, according to the first quarter Community Bank Sentiment Index released by the Conference of State Bank Supervisors. 

The quarterly mark fell two points to 83, its lowest score since the survey began in 2019 and far lower than the neutral reading of 100. The profitability component had the greatest drop for the second straight quarter, falling 18 points to 82. The regulatory burden component remained the lowest, falling four points from the fourth quarter of last year to 22.

Community Bankers rated government regulation, inflation, cyberattacks and the cost/availability of labor as top issues for this year. Expectations that the Federal Reserve’s monetary policy decisions will harm market conditions continued to hold the overall index lower but increased slightly to 39. The outlook for future business conditions remained low but increased 14 points to 51. 

“The fragile health of the economy coupled with multiple interest rate increases have been a drag on the CBSI for the past year,” said CSBS Chief Economist Tom Siems. “Interestingly, government regulation is creeping up as the top concern.” 

Many economists say the U.S. is not in a recession but will enter a downturn by the end of the year as interest rates continue to rise. A majority of economists who responded to a National Association for Business Economics survey last month said a recession will begin this year. Only five percent said the U.S. is currently in a recession.