Pretty Darn Strong

Labor markets are tight and unemployment is low

Summary: The consumer is still in pretty darn strong shape according to several companies that reported last week. Labor markets are tight and unemployment is low, but lower-income consumers are under pressure. Inflation is sticky but getting better. We probably won’t get as many rate cuts as we hoped for this year.

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Macro

Consumers are in pretty darn strong shape 

"I think the U.S. consumer remains a source of strength in the economy. The labor market remains strikingly resilient. Rising incomes have kept consumer debt servicing burdens relatively low by historical standards. And when we look at our customers, we see that they have higher bank balances than before the pandemic and this is true across income levels…on the whole, I'd say consumers are in reasonably good shape relative -- pretty darn strong shape relative to historical benchmark" - Capital One Financial (COF 0.00%↑) CEO Richard Fairbank

"Consumer spend across all segments from low to high spend has remained relatively stable. Our data does not indicate any meaningful behavior change across consumer segments." - Visa (V 0.00%↑) CFO Christopher Suh

"Consumer finances in the U.S. remained healthy due to low unemployment and real wage growth." - TransUnion (TRU 0.00%↑) CEO Christopher Cartwright

"At a Macro level, consumer spending remains resilient…The early read on April is that growth is tracking slightly ahead of the Q1 average." - Fiserv (FI 0.00%↑) CEO Frank Bisignano

"I would say the consumer globally, we think is very resilient. And we see it in, as you saw from our international business performance. And it's basically supported by two facts, very low unemployment or quite low unemployment globally and wages growing at a good pace in majority of the countries where we participate." - PepsiCo (PEP 0.00%↑) CEO Ramon Laguarta

"US markets are generally performing well, reflecting that economic resilience, as well as the potential future productivity benefits that derive from the adoption of generative AI and other sector-specific performance trends." - Nasdaq (NDAQ 0.00%↑) CEO Adena Friedman

Labor markets remain tight 

"Within the U.S., the labor market remains tight. Non-farm payrolls continue to increase and more people are reentering the workforce. Yet there continues to be nearly 9 million job openings. Wage increases have persisted at the same time, medical cost trends are rising....We are not seeing a downturn in terms of our clients. They’re employing more people. We’re seeing robust client activity at Gallagher Bassett. That’s a very good bellwether of what’s going on in the economy." - Arthur J. Gallagher & Co. (AJG 0.00%↑) CEO J. Patrick Gallagher

“ It's no secret that we are in one of the deepest freight recessions the truckload industry has ever felt. And it comes during a time when the rest of the economy is performing well such that cost inflation continues to be a challenge, labor is staying tight and interest rates are up significantly” - Knight-Swift Transportation Holdings (KNX 0.00%↑) CEO Adam W. Miller

But the lower-income consumer is under pressure

"The other double-click is in the, I would say, the lower-income consumer in the U.S. The lower income consumer in the U.S. is stretched, is making a lot of -- he is strategizing a lot to make their budgets get to the end of the month. And that's a consumer that is choosing what to buy, where to buy, and making a lot of choices. That's a consumer that we're emphasizing in our commercial programs." - PepsiCo (PEP 0.00%↑) CEO Ramon Laguarta

"Consumers continue to be anxious about inflation, particularly the lower-income consumer. In the first quarter, our upper-income consumer over-indexed in big-ticket categories and recreational purchases compared to our lower income consumer, who is prioritizing their spend on needs" - Tractor Supply (TSCO 0.00%↑) CEO Harry Lawton
Inflation is proving sticky

"We have seen inflation persist more than expected in 2024, and our input, logistics, and labor costs remain elevated." - Whirlpool (WHR 0.00%↑) CFO James Peters

"Global inflation has trended sharply lower over the last year, although it is starting to show some signs of persistence, as it moderates globally. Markets are still expecting rates to begin to decline later this year in most major markets, which will be a positive for corporates and the real estate sector, including new home buyers." - Nasdaq (NDAQ 0.00%↑) CEO Adena Friedman

But inflation is getting better

"We're seeing deflation. So I'm feeling much better about inflation in terms of pricing versus a year ago. But we're not finished…At Walmart, we are now seeing prices that are in line with where they were 12 months ago. I haven’t been able to say that for a few years now…In the last few weeks, we've taken even more prices down in areas like produce, meat, and fresh food…What I've learned in the last few years is, it's really hard to predict. I’m feeling much better about inflation in terms of pricing versus a year ago, but we're not finished." - Walmart U.S. (WMT 0.00%↑) CEO John Furner

We’re not going to get as many rate cuts as we hoped for

"I think if you approach the first part of the year, January, and the betting odds, the line was six Fed rate cuts. I mean, that’s kind of what the market was telling you was supposed to happen this year...I think you fast forward to today, and I think the handicapping is down to one to two rate cuts." - Moelis (MC 0.00%↑) CEO Kenneth Moelis

International