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- A study from Amazon economists estimates a 30% chance of a US recession in the next six months.
- Most other forecasts are doom and gloom, with some predicting a 100% recession chance in 2023.
- If there is a recession, Amazon is banking on a few factors to avoid much of the disruption.
Across tech the mood is apocalyptic.
Amazon’s stock has sunk almost 50%. Meta is down 66%. Google’s off 37%, while Apple and Microsoft tumbled more than 20% this year. Well over $1 trillion has been wiped off the value of the most powerful tech companies.
The pandemic boom is well and truly over for the industry. Now rising interest rates are pulling investors away from the sector, Gene Goldman, the chief investment officer at Cetera Investment Management, said. Dealmaking has taken a hit, and tech initial public offerings pretty much didn’t happen in 2022.
The consensus is that 2023 will be just as bad, or worse. Bloomberg reported Tuesday that 70% of economists in a monthly survey said they believed a recession would come in the first half of 2023.
The consensus may not be right on this one.
Amazon doesn’t think a recession is all that likely. Insider reported Thursday the Seattle company’s economists saw just a 30% chance of a US recession in the next six months.
Through its giant e-commerce and cloud businesses, the company has unique insights into consumer and business activity. Here are some of the more surprising findings from Amazon’s internal report:
- Everyone is worried about inflation. Yet Amazon’s economists reckon this won’t affect the company as much as other businesses. They expect the price of Amazon products to rise less than 3% next year and then drop in 2024.
- If a recession does occur, Amazon economists don’t think the company will endure much pain. The company gets about 60% of its revenue from higher-income consumers who are less affected by higher unemployment and other recessionary outcomes.
- Lower-income consumers have been joining the company’s e-commerce platform in recent years. That has helped Amazon grow, but these customers are more sensitive to an economic slowdown, and inflation chips away at more of their disposable income. So growth maybe a little harder to generate for Amazon in 2023.
Much of the economic pain in the tech industry is concentrated in unprofitable companies that can’t stomach more interest-rate hikes. Amazon is not really in that camp. Neither are Meta, Google, Apple, or Microsoft.
And Wall Street eggheads can get so caught up in inflation data that they miss the continued strength of the consumer. That’s the engine that drives most of the US economy and a lot of Amazon’s success. At this point, the two are closely intertwined, so here’s to some relatively good news as we leave a tough 2022 behind and start fresh in January.