The first is inflation. With energy costs soaring, how easy is it to raise prices? Can they cover their own higher input costs? The question is whether the burden falls more on what shoppers end up paying or on companies’ margins.
The second is consumers’ appetites. Earnings estimates have been reduced most for the likes of Target and Amazon.com, which appear vulnerable to cutbacks in discretionary spending. But there are many ways households might cope. People may decide, for example, that they can switch to cheaper food brands or take shorter vacations to still be able to afford a new car.
Among the banks, look for how demand for loans is holding up. Even though interest rates are rising, companies that expect to grow will still borrow to invest in future capacity. Or, if they don’t, borrowing is one of the first things to go down.
Then there is the question of jobs. We have seen lots of signs of cuts, especially in technology. The issue will be whether they are widespread and deep. Stronger-than-expected U.S. jobs numbers for June should relieve concern that a recession is imminent, according to Goldman Sachs economist Jan Hatzius.
Finally, we want to know what companies themselves think about whether a recession is coming and how that matches up with their own plans. It is possible for them to predict a broad economic downturn and still see plenty of growth for themselves. If enough companies think the recession is happening elsewhere and keep on spending, things might turn out better than feared.