No Alarm Bells

The US economy continues to be resilient and consumers are still spending

Succinct Summary: The US economy continues to be resilient and consumers are still spending. Inflation has come down but not as much as the Fed would like it to, and so it looks like the Fed may raise rates two more times before the end of the year. According to Fastenal, the industrial economy may have a rough couple of quarters ahead of it.

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Macro

The US economy continues to be resilient

"The U.S. economy continues to be resilient. Consumer balance sheets remain healthy, and consumers are spending, albeit a little more slowly. Labor markets have softened somewhat, but job growth remains strong. That being said, there are still salient risks in the immediate view - many of which I have written about over the past year.” - JPMorgan Chase (JPM 0.00%↑) CEO Jamie Dimon

You’re not hearing any alarm bells on consumers

"You're not hearing any alarm bells ringing from Mark or myself at all here on the U.S. consumer. I think we see the U.S. consumer as resilient…I don't think we should be overly concerned here about the health of the U.S. consumer." - Citigroup (C 0.00%↑) CEO Jane Nind Fraser

"We’re seeing overall very, very good consumer behavior, especially when it refers to our categories and that’s why we raised guidance on our top line and because of the first factor, we raised guidance on the second - on the bottom line as well." - PepsiCo (PEP 0.00%↑) CEO Ramon Laguarta 

And inflation is coming down 

"When we think about what that will look like moving forward in our '24 guide, we expect that pricing will return closer to historical and our cost inputs are in a similar spot, as you saw in the CPI report that came out yesterday and the PPI report that came out this morning. We are seeing inflation coming down" - Cintas (CTAS 0.00%↑) CEO Todd Schneider

"Clearly, what we're seeing here is the beginning of food inflation starting to come down...when we look at the price of the 100 highest volume products that we sell, what we've seen is the price of those products at the end of the quarter compared to the start of the quarter, those prices have come down" - Sainsbury’s ($SBRY) CEO Simon Roberts

"Year-over-year inflation for food and sundries continues to decrease and was lower than in May. Year-over-year fresh foods inflation has returned to historically normal levels in the low single digits, consistent with the last couple of months." - Costco (COST 0.00%↑) Assistant Vice President of Financial Planning & Investor Relations Josh Dahmen

But it will still take time for inflation to return to the Fed’s target

"So I think clearly, everyone wants inflation to come down faster, but it is going to take time, and it's not going to happen as quickly as I suspect everyone would wish it to. In terms of over the balance of the year, we do expect inflation to come down, but we expect to still retain a situation of inflation. And I think it's just prices that is going to be going up less quicker than they have been" - Sainsbury’s ($SBRY) CEO Simon Roberts

"Inflation is going to be reducing reduce but we don’t see the basket of commodities going negative any time soon. So, we’ll continue to take pricing, probably not at levels in recent past." - Disney (DIS 0.00%↑) CEO, Bob Iger

Inflation hasn’t come down enough for the Fed

"This is welcome news, but one data point does not make a trend. Inflation briefly slowed in the summer of 2021 before getting much worse, so I am going to need to see this improvement sustained before I am confident that inflation has decelerated." - Fed Governor Christopher Waller

The Fed is still planning to tighten 

"The robust strength of the labor market and the solid overall performance of the U.S. economy gives us room to tighten policy further... I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target…Pausing rate hikes now, because you are waiting for long and variable lags to arrive, may leave you standing on the platform waiting for a train that has already left the station " - Fed Governor Christopher Waller

International