PanamaTimes

Wednesday, Feb 05, 2025

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

PanamaTimes
0:00
0:00
Close
The Trump administration is considering El Salvador's proposal to accommodate U.S. prisoners.
Trump Wins Again as Canada Agrees to Strengthen Border Security
Wall Street Journal Criticizes Trump's Trade War with Canada and Mexico
Trump Freezes Tariffs on Mexico After Agreement on Border Security
Nearly 96% of New Cars Registered in Norway in January Were Electric
Marco Rubio Urges Panama to Limit Chinese Influence Amid Canal Dispute
Apple Surpasses Revenue and Earnings Expectations, But iPhone Sales Disappoint
Bill Gates Reflects on Past Mistakes and Acknowledges Yuval Noah Harari's Insight
Trump Imposes Emergency Tariffs on Colombia Following Immigration Dispute
Musk and X Intensify Legal Battle Over Advertising Boycott, Suing Nestlé, LEGO, and Shell
Trump: Canada Should Become the 51st U.S. State
U.S. President Trump Asserts Intent to Reclaim Panama Canal Amid Rising Geopolitical Tensions
Panama Rules Out Negotiations With US Over Control of Canal
The 'Chinese Pearl Harbor' on U.S. Tech: DeepSeek's Launch Triggers Market Collapse
Key Takeaways from the 2025 World Economic Forum in Davos
The Trump Era 2: A Time of Dramatic and Profound Change
Five Billionaires on Track to Break One Trillion Dollar Wealth Barrier
Bill Ackman Praises Social Media Platform X as 'The New Media'
California Wildfires Set to Become Costliest in U.S. History
Chief Justice Roberts Warns Against Threats to Judicial Independence
Generation Z Faces Scrutiny Over Workplace Readiness
Democrats Call on Biden to Protect Controversial Temporary Protected Status Program
Trinidad and Tobago Declares State of Emergency as Murder Rates Surge
Migrant Children Abandoned at U.S.-Mexico Border
The Closure of the Global Engagement Center: Controversy, Claims, and Conclusions
The American Democrats Party Strives to Rise from the Ashes
Trump Nominates Kevin Marino Cabrera as Ambassador to Panama Amid Canal Dispute
Texas Congresswoman Kay Granger Located in Nursing Home Following Six Months of Inactivity
A large group of unauthorized migrants is traveling through Mexico with the aim of reaching the USA before Trump assumes office.
A Democrat Congresswoman with blue and black hair is having a breakdown over "President Musk."
Argentina Defies Predictions with Record $17 Billion Trade Surplus, But Is the Growth Sustainable?
Disney's High Seas Gamble: Navigating the Waters of Cruise Expansion
The Surprising Impact of Extreme Heat on Mexico's Youth
Polarization: The Word That Unites a Divided Era
Exoneration in the Subway: The Complexities of Self-Defense and Public Safety
The Tragic Passing of UnitedHealthcare CEO Highlights Corporate Security Challenges
Global Developments: Violence in Sinaloa, Political Chaos in the Bahamas, Venezuelan Voting Disputes, and a Major UK Drug Bust
OpenAI and Anduril: Charting AI's Path in Modern Warfare
The Pardon of Hunter Biden: A Symbol of Hypocrisy
Biden Crafted the Strategy Used by Trump
South Korea's Democracy Tested: President Yoon’s Martial Law Reversal Sparks Political Reckoning
Seoul Crisis: Yoon Suk Yeol's Martial Law Blunder Triggers Political Upheaval
Generative AI's Limited Impact on Elections Highlighted by Meta
France at the Precipice: Barnier’s Administration Confronts Unprecedented No-Confidence Vote
Jaguar Unveils Electric Concept Car, Type 00
White House Defends Presidential Pardon of Hunter Biden
xAI by Elon Musk: Transforming Ambition with a $50 Billion Valuation
President-elect Donald Trump, has announced on Truth Social that Kashyap "Kash" Patel, will be the next Director of the FBI
A Historic Milestone or Risky Precedent? The Assisted Dying Bill Splits both Parliament and the Nation in England and Wales
Trump's Tariff Threat Looms Large as Trudeau Heads to Mar-a-Lago for Talks
×