Image: Reuters Berita 24 English - Some worldwide consumers are starting to exhibit indications of weakness as they stick to buying necessit...
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| Image: Reuters |
Berita 24 English - Some worldwide consumers are starting to exhibit indications of weakness as they stick to buying necessities like food, bleach, and inexpensive burgers while those with larger bank accounts are buying $3,000 Louis Vuitton handbags. This is because they are feeling the strain of record inflation.
Investors are attentively examining business data for the second quarter in search of warning signals of an impending recession. However, consumer indications so far are contradictory. Those who have been hardest hit by record fuel and food prices are showing signs of vulnerability. Some people are still spending money on vacation and other upscale activities, according to credit card and other data.
On Monday, Walmart issued an unusual profit warning, sounding the alarm. Customers in the United States, who typically come from lower-income homes, tend to avoid the clothing and sporting goods aisles in favour of purchasing food and other necessities.
According to Nicola Morgan-Brownsell, fund manager at Legal & General Investment Management, "the results overnight indicate that the U.S. consumer is now much more focused on the staples side of shopping where we've had double-digit food inflation coming through in some of these businesses."
In July, consumer confidence in the United States decreased for a third consecutive month due to ongoing concerns about rising interest rates and inflation.
Although marginally lower than earlier in the year, sales at luxury company LVMH Moet Hennessy Louis Vuitton SE increased by 19 percent in the second quarter. Sales of high-end liquor and handbags in Europe and the US countered declines brought on by COVID-19 lockdowns in China.
As a result of the summer travel boom and some consumer resilience, payment processor Visa reported a 40 percent increase in cross-border volume.
But Xbox maker's video game income was hurt by weaker consumer demand. Microsoft reported a 7 percent decline in revenue from the Xbox and anticipates a larger decline this quarter. Texas Instruments, a manufacturer of microchips, observed a decline in consumer demand for personal electronics.
THE PURCHASE, BUT FOR HOW LONG?
The consumer behemoths Coca-Cola Co, McDonald's Corp, and Unilever Plc all said on Tuesday that their goods continue to be in demand despite being sold for more money.
Unilever, a company with 400 brands that includes products including Domestos bleach, Knorr stock cubes, and Hellmann's mayonnaise, increased its full-year sales guidance after exceeding first-half underlying sales projections while raising prices.
Customers are buying thus far, but it's unclear how long that will continue.
"When we go shopping on a weekly basis, we notice price hikes. How much more tolerant of the price rises can the consumer be, one wonders?" Ashish Sinha, portfolio manager at Unilever and a shareholder in Reckitt, stated.
McDonald's, which runs close to 40,000 restaurants, reported that its global same-store sales increased by almost 10%, above expectations of a 6.5 percent growth.
Even so, according to Chief Financial Officer Kevin Ozan, the Chicago-based company is debating whether to expand its selection of menu items at a discount because rising inflation, particularly in Europe, is pressuring some lower-income customers to "trade-down" to less expensive items and purchase fewer large combination meals.
According to the corporation, growth in both developed and emerging countries drove an 8 percent gain in Coke's global sales volumes during the second quarter, and a 12 percent increase in average selling prices was also reported.
According to CFRA analyst Garrett Nelson, "Coke's results are testament to its brand value because customers are unwilling to trade down to rival colas, despite increased pricing."
QUIET UP AHEAD?
Due to a delayed recovery for its business in China, German-based footwear manufacturer Adidas AG lowered its profitability forecast for the year.
The shares of General Motors Co. fell on Tuesday despite the company's reaffirmation of its full-year profit outlook and its announcement that it was reducing spending and hiring in anticipation of a potential economic slowdown. A 40 percent decline in the company's quarterly net income disappointed investors.
The Detroit automaker's decreased net profitability was a result of supply-chain bottlenecks, including a global scarcity of semiconductor chips that was particularly severe in June. The stock price of the corporation dropped by 3.4%.
However, GM believes there is a lot of unmet demand.
Paul Jacobson, GM's chief financial officer, stated that GM continues to observe good pricing and demand for its automobiles.
A standard Chevrolet model from General Motors costs roughly $31,500, while a fully equipped GMC Sierra can cost up to $100,000. The majority of models cost between $50,000 and $70,000.
We're pleased that we were able to make up all of that (lost) volume in the second half of the year, he added.
