KPMG Economist Warns of "Running on Empty" Growth Amid Supply Chain Shocks

The phrase captures the tension at the heart of KPMG's latest economic outlook: growth that keeps moving but increasingly struggles to accelerate. Diane C. Swonk, KPMG's U.S. Chief Economist, published the April 8 Economic Compass under the heading "Running on Empty? War, supply chain shocks & the outlook," a report that landed as audit teams were closing out Q1 client deliverables and M&A practices were mapping Q2 pipelines.

Swonk's analysis draws a careful distinction between current conditions and past supply-chain crises. Energy shocks today are smaller in relative scale, capital markets carry tighter financing costs than in prior recovery cycles, and labor markets are structurally more flexible than they were during previous inflationary episodes. That might sound reassuring. The problem, in Swonk's framing, is that upside cost risks and downside demand risks can conspire even without a dramatic break, producing a sustained drag that keeps the economy functional while depleting its forward momentum.

For KPMG's audit practices, the implications are immediate. Teams finalizing Q1 work products need to stress-test client going-concern assumptions and update risk assessments to reflect tightening financial conditions. Clients in energy, transportation, and manufacturing, sectors directly exposed to supply-chain disruption, warrant closer scrutiny of liquidity positions and covenant headroom before Q2 deliverables go out the door.

Transaction teams face a different kind of recalibration. Shifts in deal flow and valuation multiples tend to follow macro inflection points with a lag, and the Compass signals that M&A and private equity advisory professionals should be building scenario-based valuation frameworks rather than anchoring to trailing comparables. Tax and transfer-pricing teams can expect a parallel surge in client demand around cash-preservation strategies as corporate treasurers respond to a tightening cost environment.

The report also carries weight for how KPMG manages its own workforce. Downward pressure on client budgets historically prompts firms to revisit hiring cadence, promotion timelines, and utilization forecasts. For associates and managers on the partner track, a compressed demand environment means realization metrics will be watched closely through the rest of the year. The Q2 planning cycle is already underway, and practice leaders are making resourcing decisions against a backdrop that Swonk characterizes as fragile rather than resilient.

For professionals earlier in their careers, the Economic Compass doubles as a signal about which skills are gaining value. Stress-testing, scenario modeling, and liquidity advisory are precisely the capabilities clients will reach for first when conditions tighten. Recognizing that before the client calls puts any KPMG professional in a stronger position, both on the engagement and in the internal conversations that shape who gets staffed on what.

The report stops well short of forecasting a recession. What it describes is harder to plan around: an economy that may satisfy headline growth metrics while quietly eroding the conditions that support expansion, deal activity, and sustained hiring. For a firm whose revenue depends on client confidence and transaction volume, that distinction matters more than the top-line number.