Bianca Flowers and Joseph White
CHICAGO/DETROIT (Reuters) – Companies that make SUVs, washing machines, heavy equipment, hamburgers and other goods at the heart of the U.S. consumer economy are doing well well into the end of 2022.
But business executives on the conference call were cautious about Tuesday’s approach, noting strong demand and the need to keep costs down in the face of rising inflation and expectations of slower economic growth. I pointed it out, but it didn’t collapse.
General Motors Chief Financial Officer Paul Jacobson said on a conference call Tuesday after the company reported better-than-expected results and predicted a better-than-expected 2023 by analysts. “We haven’t done anything in anticipation,” he said. “Consumer demand is still holding up.”
Bellwethers, including McDonald’s, General Motors, Exxon Mobil, appliance maker Whirlpool and delivery giant United Parcel Service, posted better-than-expected results.
The S&P 500 companies are now reporting 4.5% year-over-year revenue growth. This is better than his Jan. 1 forecast, but falls short of his double-digit growth rate last year and is expected to slow in the first half of 2023, which supports a cautious outlook. .
GM’s Jacobson said:
Not just GMs. Exxon also said it would cut spending even after reporting his record $56 billion profit in 2022, and UPS beat expectations, partly due to spending cuts.
“Soft Landing Thesis”
But the hundreds of thousands of tech job layoffs announced by the likes of Microsoft and Intel have not been reflected in the rest of the economy. That bodes well for the economy as a whole, according to RBC Capital Markets equity analyst Lori Calvasina.
“The lack of major layoffs in the industrial sector of the economy so far supports the soft landing theory,” she wrote on Monday. Calvasina said the market’s recent performance may reflect expectations of a gradual downturn following a strong recovery in 2024.
The S&P 500 rose 4.6% in January, its best first month since 2019. It’s still early, but the Federal Reserve Bank of Atlanta’s first quarter GDP forecast is currently at 0.7%.
The economy’s performance could depend on whether the price pressures that have plagued consumer and business spending begin to abate. There’s some evidence of that, as the Core Personal Consumption Expenditure (PCE) price index rose 5% year-on-year in December to its lowest level since September 2021.
Still, that rate still squeezes margins, many executives said Tuesday. Whirlpool Corp CEO Marc Bitzer said “inflationary pressures remained stubbornly high” during the fourth quarter, and Caterpillar executives said after the company’s last earnings call expected price pressures to ease. , suggested that price pressure will continue. Cat’s fourth quarter earnings were down 29%.
That said, the feeling about the economy itself remains relatively positive.
“Inflation will continue into 2023,” McDonald’s Chief Executive Christopher Kempzynski said on Tuesday’s earnings call. Yes, consumer sentiment is still depressed in many markets, but we are not seeing it now.”
(Reporting by David Gaffen; Bianca Flowers, Chicago; Paul Lienert and Joe White, Detroit; Hilary Russ, New York; Written by David Gaffen)
