Weak Trends

The economy continues to look weak in many segments

Succinct Summary: The economy continues to look weak in many segments: the consumer is weakening, the banking industry is under stress, transport is experiencing a freight recession, and corporate IT spend is slowing. The weakness is helping to slow inflation but inflation still isn’t low. McDonald’s, for instance, still sees high single-digit inflation in 2023. If we are headed for a recession, it won’t be a surprise though.

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Macro:

There are softening trends in consumer spending

"...we are seeing a slight decrease in units per transaction. So, things like did someone add fries to their order, how many items are they buying per order, we're seeing that go down in most of our markets around the world slightly, but it's still going down…we are seeing, in some places, resistance to pricing, more resistance than we saw at the outset. So I think all of those things are reflective of, again, a more challenging macro environment." - McDonald’s (MCD 0.00%↑) CEO Chris Kempczinski

"Turning to our results. 2023 is proving to be an interesting year. In the U.S., relative to our base plan, volume was higher than we expected in January, close to our plan in February and then moved significantly lower than our plan in March, as retail sales contracted, and we saw a shift in consumer spending." - United Parcel Service (UPS 0.00%↑) CFO & EVP of Corporate Services Carol Tomè

"Across the globe, we're still seeing lower demand due to softer consumer sentiment impacting discretionary appliance purchases, which resulted in a revenue decline of 5.5%...A broader macrocycle has continued to present challenges for most industries and the impact of the recent banking crisis has renewed consumer concerns, impacting sentiment and demand." - Whirlpool (WHR 0.00%↑) President of North America Marc Bitzer

Inflation is decelerating

"We're seeing a deceleration of inflation, not a reduction of cost, but a deceleration of inflation." - PepsiCo (PEP 0.00%↑) CEO of Europe & Sub-Saharan Africa Ramon Laguarta

Lower inflation means lower topline growth

“We've started to see consumers rotate towards non-discretionary spending and reduced basket size. The decline in inflation is impacting volume growth, particularly in the metro vertical." - Fiserv (FISV 0.00%↑) COO Frank Bisignano

"In March, payments volume growth ticked down and has remained at similar growth levels through the first 3 weeks of April. The primary driver of the tick down in the growth rate has been U.S. ticket size, while transaction growth remains in line with Q1 levels at around 8%. Ticket size was up over 1% year-over-year in the first quarter and is down about 2% in March through April 21. Ticket sizes are declining as inflation moderates." - Visa (V 0.00%↑) CFO Vasant Prabhu

Inflation is declining but is still high

"...if you look at the U.S., we certainly believe we're on a downward trend, although inflation remains elevated. So if you look at commodity inflation on the food and paper front in 2022, we were in the mid-teens level in the U.S. This year, we think it will be mid-to-high single digits. I think labor inflation will still remain elevated just on the back of a really continued strong labor market…by the end of the year, we're gonna be looking at probably high single digit in inflation on a full year" - McDonald’s (MCD 0.00%↑) President Ian Borden

If we have a recession it will not be a surprise

"We've had 13 recessions since World War 2 and we've had 13 recoveries. Maybe we're gonna have one. If this is a recession, it's probably the most predicted one ever. You know, I never know when we're gonna go. I'd love to know the future. I think it would help. I'd be a better investor. I'd pay five extra dollars for next year's Wall Street Journal. It would really help. Right? I cannot predict the future, but this recession is so expected, so predicted. Maybe it's coming." - Magellan Fund Manager Peter Lynch

International