We see more of a ‘Stagflation’ economy

James G. Cole

AT&T CEO (T) John Stankey is taking a cautious stance on the short-term outlook for an economy continuing to wade through high levels of inflation and a tick-up in layoffs.

“It’s hard to say,” Stankey told Yahoo Finance Live at the Goldman Sachs Communacopia + Technology Conference, when asked if the U.S. economy feels recessionary.

“I would tell you right now, when you see the numbers coming in on inflation, it’s hard to believe it’s not going to have an impact at some point. And even if we miss a full-on recession, the question is, ‘Is the growth strong enough to really supplant the high levels of inflation?’ And we see more of a stagflation environment. But I think we’re going to have to wade into the fourth quarter, first quarter of next year, to really see what the outcome of that game is,” he said.

Stankey isn’t alone in offering up a more sobering take on the economy as the calendar eyes October —and more growth-stunting rate hikes from the Federal Reserve.

Goldman Sachs chief economist Jan Hatzius slashed his 2023 GDP forecast this week to 1.1%. Previously, Hatzius was looking for 1.5% growth.

Hatzius says he sees a “somewhat worse” outlook for growth and employment next year as the Fed tightens financial conditions to comat inflation.

The closely watched economist’s GDP cut comes hot on the heels of headline grabbing financial warnings from Fedex and Ford, both of which blamed mixed economic conditions.

As for AT&T, recent trends in its business underscore the economic pressures weighing on households.

On July 21, the telecom giant’s stock fell 7% after the company revealed in its second-quarter earnings that customers were paying their bills about two days later compared to trends seen in the previous year. That in turn caused AT&T to reduce its full-year free cash flow guidance by $2 billion.

“We haven’t seen any changes on the trend,” Stankey told Yahoo Finance Live. “It hasn’t deteriorated any further, and frankly, we wouldn’t expect it to.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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