KazPost

Kazakhstan News
Tuesday, Feb 27, 2024

Demand For Beer And Handbags Help Temper US Recession Fears for Now

Demand For Beer And Handbags Help Temper US Recession Fears for Now

Unilever Plc on Thursday reported sales that topped expectations, keeping up the surprises after Nestle SA kicked off the week with a similar beat.

Heightened worries about the strength of consumers and the global economy have been put on hold - at least for now - after some of the world's best known companies delivered a slew of better-than expected numbers.

Unilever Plc on Thursday reported sales that topped expectations, keeping up the surprises after Nestle SA kicked off the week with a similar beat. Carlsberg A/S notched up its full-year profit outlook and LVMH reported an 18% sales surge as Chinese shoppers splashed out on luxury handbags and jewelry.

The good news wasn't confined to consumer goods. Results from Alphabet Inc.'s Google and Microsoft Corp. gave Big Tech a lift, and Europe's banks largely added to the positive mood.

The figures paint a picture of a world where households, businesses and economies are putting up resistance to the tightening vise of rampant inflation and rising interest rates, and delaying the recession some forecast will take hold this year.

But it's still a grind and cracks are showing. Crucially, the share-price reaction to recent results has been muted at best as investors worry about the outlook.


Also on Thursday, drinks maker Keurig Dr Pepper Inc. reported quarterly earnings that beat the average analyst estimate. Household and personal-care products seller Church & Dwight Co. cited strong consumer demand as it issued guidance that was above analyst estimates. Mastercard Inc. reported spending growth on its cards accelerated in the first three months of the year, topping estimates, as the payment giant continues to benefit from a rebound in travel.

"At the beginning of this year we were expecting to see a recession in several economic regions, and that hasn't actually come through," said Eleanor Taylor Jolidon, co-head of global equities at Union Bancaire Privee. And while market earnings expectations had been revised down, "there was quite a big relief to see that the first quarter has gone quite well across a number of sectors."

Meanwhile drinks firm Pernod Ricard SA forecast annual profit growth of 10% even after its quarterly sales fell short of expectations.

"Today we see pretty good resilience in Europe," said Alexandre Ricard, the chairman and chief executive. "So far, so good."

Automakers including Mercedes-Benz Group AG and Renault SA have also been faring better than expected, even amid the inflation pressure on buyers. They're benefiting from strong order books that piled up from long stretches of supply-chain problems, but the question is how long the tailwind can last.

American Consumers


The US economy took some of the shine from the news on Thursday, reporting slower-than-expected growth of 1.1% in the first quarter. Consumer spending, however, rose 3.7%, the fastest in almost two years.

"The consumer is the backbone of the US economy, and the consumer is resilient," said Lindsey Piegza, chief economist at Stifel Nicolaus & Co. in Chicago.

Amid the multiple factors pushing and pulling on demand, inflation is the key. Consumers see it in the news headlines, experience it in the supermarket stores and feel it in their pockets.

"It's very far from certain that there will be deflationary pressures in the second half of the year," said Unilever Chief Executive Alan Jope. Executives pointed to pressure from wages and food products such as sugar.

Lower Bar


There are other reasons to be cautious about the latest earnings season. The better-than-expected results can be partly explained by a sharp cut in analysts' estimates, which lowered the bar for companies to outperform. Coming out the other side, data from Bloomberg Intelligence show that while nearly 83% of S&P 500 firms beat first-quarter estimates so far - the biggest proportion since the second quarter of 2021 - the average stock has outperformed the index by just 0.2% on the day of results.

And those that missed expectations have been punished to a larger degree, underperforming the benchmark by almost 3%.

In Europe, the Stoxx 600 Index has struggled to sustain a first-quarter rally since the start of the reporting season.

"It would be naive to extrapolate the initial positive start to the earnings season as a sign of higher stock market performance as there are a number of headwinds," said Aneeka Gupta, director of macroeconomic research at WisdomTree. She noted "tighter lending standards owing to the banking crisis, further rate rises by the European Central Bank due to the stickier core inflation, currency headwinds and a global economic slowdown."

Some of the consumer strength may be thanks to the scale of savings after the pandemic. But that's not an endless resource. And it may dwindle even faster as mortgage rates rise, tightening the squeeze on borrowers. That's a particular risk in the UK, where a housing affordability crisis is brewing.

"Every household up and down the country has spent a lot of time noticing the prices of different products," Simon Roberts, chief executive of grocery chain J Sainsbury Plc said. "Customers have been watching every penny and every pound. Some of that behavior has definitely accelerated over the last few months."

A number of consumer companies see Europe as the weak spot. Unilever Chief Financial Officer Graeme Pitkethly said consumer sentiment in the region is already lower than in its other markets.

"We are also very cautious looking forward," said Nestle CFO Francois-Xavier Roger. "We see in some markets, more specifically in Europe for example, volume of consumption being in negative territories."

On the pricing front, easing commodity prices haven't yet translated fully through to shoppers because companies hadn't put through all the cost increases and were catching up to protect margins.

On Thursday, Carlsberg warned that the impact on demand from higher beer prices and faster inflation "remains uncertain."

According to Bernstein analyst Bruno Monteyne, there's a reckoning coming at some point.

"Something has to change," he said. Either volumes start dropping now, bringing inflation under control, or they remain strong, leading to even bigger price increases, which leads to a slowdown later. "How long can we keep dancing to this tune?"

Newsletter

Related Articles

KazPost
0:00
0:00
Close
It's always the people with the dirty hands pointing their fingers
Paper straws found to contain long-lasting and potentially toxic chemicals - study
FTX's Bankman-Fried headed for jail after judge revokes bail
Blackrock gets half a trillion dollar deal to rebuild Ukraine
America's First New Nuclear Reactor in Nearly Seven Years Begins Operations
Southeast Asia moves closer to economic unity with new regional payments system
Today Hunter Biden’s best friend and business associate, Devon Archer, testified that Joe Biden met in Georgetown with Russian Moscow Mayor's Wife Yelena Baturina who later paid Hunter Biden $3.5 million in so called “consulting fees”
Singapore Carries Out First Execution of a Woman in Two Decades Amid Capital Punishment Debate
Google testing journalism AI. We are doing it already 2 years, and without Google biased propoganda and manipulated censorship
Unlike illegal imigrants coming by boats - US Citizens Will Need Visa To Travel To Europe in 2024
Musk announces Twitter name and logo change to X.com
The future of sports
Unveiling the Black Hole: The Mysterious Fate of EU's Aid to Ukraine
Farewell to a Music Titan: Tony Bennett, Renowned Jazz and Pop Vocalist, Passes Away at 96
Alarming Behavior Among Florida's Sharks Raises Concerns Over Possible Cocaine Exposure
Transgender Exclusion in Miss Italy Stirs Controversy Amidst Changing Global Beauty Pageant Landscape
TikTok Takes On Spotify And Apple, Launches Own Music Service
Global Trend: Using Anti-Fake News Laws as Censorship Tools - A Deep Dive into Tunisia's Scenario
Arresting Putin During South African Visit Would Equate to War Declaration, Asserts President Ramaphosa
Hacktivist Collective Anonymous Launches 'Project Disclosure' to Unearth Information on UFOs and ETIs
Typo sends millions of US military emails to Russian ally Mali
Server Arrested For Theft After Refusing To Pay A Table's $100 Restaurant Bill When They Dined & Dashed
The Changing Face of Europe: How Mass Migration is Reshaping the Political Landscape
China Urges EU to Clarify Strategic Partnership Amid Trade Tensions
Europe is boiling: Extreme Weather Conditions Prevail Across the Continent
The Last Pour: Anchor Brewing, America's Pioneer Craft Brewer, Closes After 127 Years
Democracy not: EU's Digital Commissioner Considers Shutting Down Social Media Platforms Amid Social Unrest
Sarah Silverman and Renowned Authors Lodge Copyright Infringement Case Against OpenAI and Meta
Why Do Tech Executives Support Kennedy Jr.?
The New York Times Announces Closure of its Sports Section in Favor of The Athletic
BBC Anchor Huw Edwards Hospitalized Amid Child Sex Abuse Allegations, Family Confirms
Florida Attorney General requests Meta CEO's testimony on company's platforms' alleged facilitation of illicit activities
The Distorted Mirror of actual approval ratings: Examining the True Threat to Democracy Beyond the Persona of Putin
40,000 child slaves in Congo are forced to work in cobalt mines so we can drive electric cars.
Historic Moment: Edgars Rinkevics, EU's First Openly Gay Head of State, Takes Office as Latvia's President
An Ominous Shift in Warfare: Western Powers Risk War Crimes and Violate International Norms with Cluster Bomb Supply to Ukraine
Bye bye democracy, human rights, freedom: French Cops Can Now Secretly Activate Phone Cameras, Microphones And GPS To Spy On Citizens
The Poor Man With Money, Mark Zuckerberg, Unveils Twitter Replica with Heavy-Handed Censorship: A New Low in Innovation?
The Double-Edged Sword of AI: AI is linked to layoffs in industry that created it
US Sanctions on China's Chip Industry Backfire, Prompting Self-Inflicted Blowback
Meta Copy Twitter with New App, Threads
The New French Revolution
BlackRock Bitcoin ETF Application Refiled, Naming Coinbase as ‘Surveillance-Sharing’ Partner
Corruption in the European Parliament - Business as usual
UK Crypto and Stablecoin Regulations Become Law as Royal Assent is Granted
Paris Suburb Grapples with Violence as Curfew Imposed: Saint-Denis Residents Express Dismay and Anger
A Delaware city wants to let businesses vote in its elections
Alef Aeronautics Achieves Historic Milestone with Flight Certification for World's First Flying Car
Google Blocked Access to Canadian News in Response to New Legislation
French Politicians Advocate for Pan-European Regulation on Social Media Influencers
×