Weighing the Risks of Inflation, Recession, and Stagflation in the U.S. Economy

The biggest liability could be how policymakers respond in the next few months.

by

and

Martin Reeves

by

and

Martin Reeves

June 10, 2022

Steven Puetzer/Getty Images

Summary.

It’s easy to point to the U.S. economy’s vulnerabilities: Despite the strong labor market and strong household balance sheets, consumer confidence has been depressed for a while, likely driven by energy prices. Deteriorating business sentiment can weigh on investment rapidly, robbing the economy of momentum. But the greatest risk for a recession is monetary policy makers, who in trying to moderate inflation have pushed up the risk of a recession. The authors offer four priorities for executives to focus on while navigating the macroeconomic risks.

The macroeconomic outlook continues to dominate the executive agenda. Last year, when demand overshot and supply chains sputtered, many firms discovered pricing power they never experienced before.

Philipp Carlsson-Szlezak is a managing director and partner in BCG’s New York office and the firm’s global chief economist. He is a coauthor of Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk (Harvard Business Review Press, 2024).
Paul Swartz is an executive director and senior economist in the BCG Henderson Institute, based in BCG’s New York office. He is a coauthor of Shocks, Crises, and False Alarms: How to Assess True Macroeconomic Risk (Harvard Business Review Press, 2024).
Martin Reeves is the chairman of Boston Consulting Group’s BCG Henderson Institute in San Francisco and a coauthor of The Imagination Machine (Harvard Business Review Press, 2021).

Weighing the Risks of Inflation, Recession, and Stagflation in the U.S. Economy

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