As the calendar creeps toward July, the month that will crown this U.S. expansion the longest on record, recession fears are increasingly popping up in corporate America.
Some company leaders are worried that strong economies do eventually reverse. Some have been unnerved by recent gyrations in the stock market. But most are reserving judgment: noting, like economic policy makers do, that risks have increased but real activity still looks strong. Many are sending a positive message while battening down the hatches in case an economic storm does materialize.
Here’s a summary of what some of America’s biggest publicly-traded companies have said over the past week -- the good, the bad, and the worried.
Ford Motor Co.
Many companies, including carmaker Ford, predict a slowdown this year -- but not an apocalyptic one.
“Relative to 2018, we expect a deceleration in the rate of growth in the U.S., Europe and China,” Chief Financial Officer Robert Shanks said at a conference. “We do not expect or foresee a recession to occur in the U.S. during the year. Now we see global industry volume to be about flat compared with 2018. This includes a decline in the U.S., although industry sales will still be strong on an absolute basis, with retail down slightly and fleet down more, and that’s mainly rentals.”
Despite attention to trade wars and the government shutdown, companies continue to increase production and shipments of goods that drive the economy such as steel, aluminum, lumber, building materials and cardboard, said CSX Chief Executive Officer Jim Foote.
“Because we touch so many pieces of the economy, normally you start to see these key areas of decline” at railroads when a slowdown begins, Foote said in an interview. “We’re not seeing anything like that right now. Customers aren’t saying, ‘We’re nervous and we’re going to be cutting back.’ ”
Goldman Sachs Group Inc.
Meanwhile, banks sense a divide.
“There has been quite a disconnect between the weak market sentiment and the optimism we continue to see in corporate boardrooms,” CEO David Solomon said on an earnings call. “The absolute level of activity in the real economy remains fairly robust and this is reflected in broad CEO sentiment and our investment-banking transaction backlog.”
A Little Wary
JPMorgan Chase & Co.
CFO Marianne Lake is right there with Solomon in calling the real data solid -- but she sees reasons to be watchful.
“We would look to the sort of macroeconomic data, which is still generally supportive, and say things should be good,” Lake said on an earnings call. “But for sure sentiment is not immune to external factors. And so, manufacturing data has been a little weaker. I would say capex is sluggish on fears around global growth. Government shutdown and trade are not particularly helpful. Uncertainty is not good for anyone.”
“I wouldn’t say that I think it’s a clear and present danger, but I think we should be extremely careful because sentiment, particularly consumer sentiment, will be incredibly important,” she said.
PPG Industries Inc.
Paint, glass and chemical maker PPG sees serious risks looming ahead internationally, but even they aren’t ready to call for an absolute debacle.
“We are forecasting a slowdown in Europe, but not a recession,” CEO Michael McGarry said on a call. “The big unknown, of course, is Brexit. That could be a significant factor, but we do see significant differences by country and that’s the bigger thing than -- even Germany slowed down in the fourth quarter and that’s not necessarily a good sign, but we’ll wait and see how it continues.”
Asked about China, McGarry said “if you’d tell me what would happen with the tariffs, then I would have an answer for you,” but later noted that across a number of business lines -- refinishing, aerospace and marine -- “we have a very positive long-term outlook on China.”
Ready for the Worst?
Delta Air Lines Inc.
Other companies aren’t necessarily predicting a recession, but they’re getting ready just in case. Should the expansion croak, Delta thinks it’s prepared.
“We hear a lot of your concerns about where we are in the cycle,” CEO Edward Bastian said on a conference call. “While we haven’t really seen any weakness in domestic, we are mindful that we are many years into this expansion. And eventually we will face a recessionary or a contractionary environment.”
“We’re planning for it and we should -- would tell you more about why we feel so confident that we will weather the next cycle so much better,” Bastian said.
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