[Original]Amazon “For internal use” 2023 economic forecast, US recession “probability 30%” and “super optimistic”

According to Bloomberg Economics’ latest forecast (October 17), there is a 100% chance that the US will enter a recession within a year.

A November analysis by Fed staff economists put the odds of a recession in 2023 at around 50%.

A Wall Street Journal poll of financial economists in October found the average to be 63%.

Here’s what Amazon’s internal documentation says:

“The U.S. economy continues to give mixed signals and at this point it doesn’t look like we’re in recession (yet).

The effects of the Fed’s continuation of the rate hike cycle are expected to reach the labor market with a delay. None) overlaps without contradiction.”

A 12-page internal report compiled by Amazon’s science, economics and financial research teams is a rare glimpse into how the company perceives the economy.

Amazon has over 160 million active Prime members in the US. That’s 62% of the U.S. population, according to Insider Intelligence estimates, and its overwhelming data gives the company a more realistic view of the world’s largest economy than ever[Figure 1].

Its relatively benign economic outlook suggests that the United States may be able to avoid a deep recession despite persistently high inflation, steady interest rate hikes and prolonged geopolitical tensions.

Before publishing this article, Insider reached out to several Amazon spokespeople for comment on December 20. About 48 hours later, on December 22nd, the following reply was received after the article was published.

“The material you requested (allegedly leaked from within the company) does not reflect our position on the economy and its trends.

Chief Financial Officer Brian Olsavsky provided the company’s outlook on the company’s most recent earnings call, while CEO Andy Jassy also announced on Nov. 30 in a presentation hosted by The New York Times. He shares his perspective at the DealBook annual summit.

The views reflected in this document are those of only some of our economists.”

‘Partial immunity’ to recession

Amazon sees a high probability of recession in the rest of the world, with a 70% chance of recession in the eurozone and the UK, and a 40% chance for the global economy as a whole.

But even if the economy were to enter a recession and the unemployment rate were to rise, Amazon doesn’t think it would have a big impact on sales.

According to the aforementioned internal document,Nearly 60% of Amazon’s sales come from the purchasing behavior of those with a certain level of stable income who are “less sensitive to changes in the unemployment rate,” while the “total sales” of low-income people who are more susceptible to rising unemployment. is a small percentage of the economy,” thus making the company “partially immune” to recession.It says.

However, given that low-income customers make up the majority of the new customers that are the main driver of sales growth, the document notes that “an economic downturn could have an impact on spending in this segment,” noting that over the long term. point out the negative impact on the growth curve.

The document also warned that a slowdown in the housing market due to rising mortgage rates and falling house prices could “spread” household spending, including purchases of household items such as furniture, home décor and appliances. .

In addition, the inflation rate in the United States (year-on-year growth rate of the consumer price index) peaked at 9.1% in July 2022 and remained at the 7% to 9% level, but Amazon has increased the sales price on its own EC site. It didn’t raise that much and remained at just under 6%.Internal documents state that the sales price increase rate in 2023 will fall below 3% and will turn negative in 2024..

Fear of difficult growth

Meanwhile, Amazon has cut costs in recent months, closing multiple businesses and laying off tens of thousands of employees.

As Insider previously reported (October 13), CEO Jussy urged employees to “get more thrifty” at an all-hands meeting in early October.

“I think it’s a concern for all of our employees, but of course no one knows what’s going to happen, but there are a number of signs that the U.S. economy is going to get tougher. I’m sure.” (CEO Jassy)

According to the aforementioned internal document,In 2023, the U.S. economy is expected to “significantly worsen,” with GDP growth of less than 1% even in the base case.. Similar slowdowns are projected for other developed countries, he said.

The rationale behind this is that the International Monetary Fund (IMF) has concluded that global economic growth will be the worst since 2001 (excluding the immediate aftermath of the 2008 global financial crisis and the 2020 pandemic). Outlook” October revision is cited.

These facts could make it difficult for Amazon to grow and generate revenue at the same time.

Based on the history up to this point, internal documents point out that profit margins have shrunk in the process of business growth, and business growth has been constrained in phases where profit margins have been expanded. In that context, growth may be difficult in the current climate of drastic cost cutting (=securing profit margins).

“There is a clear trade-off between the pursuit of profit and growth, and it is difficult to achieve both at the same time. Overall, it could undermine our ability to grow faster.”