Slow or Steady?
Consumers steady but spending slows
Summary: Walmart did not see a step down in consumer spend and retail sales data was better than expected last week. But consumer spending has slowed and commentary remains fairly muted. The Fed sounds ready to start lowering rates, but may move more slowly than people expect. Rates are probably going to stay higher than they used to be.
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Macro
Walmart hasn't seen much change in the consumer
"We did not see a step down and our outlook for the back half of the year is really for more of a continuation of what we've seen. Even in the first couple weeks of August here, things have been remarkably consistent. So I know everyone is looking for some piece of information that maybe indicates further weakness with our members and our customers, we're not seeing it...So far, we aren't experiencing a weaker consumer overall” — Walmart (WMT 0.00%↑) CFO John D. Rainey
But spending has slowed down
"Well, in our consumer base of 60 million customers spending every week, what you're seeing is they're spending at a rate of growth of this year over last year, for July and August so far, about 3%. That is half the rate it was last year at this time. And so the consumer has slowed down. They have money in their accounts, but they're depleting a little bit. They're employed, they're earning money, but if you look at- they've really slowed down. So the Fed is in a position they have to be careful that they don't slow down too much." — Bank of America (BAC 0.00%↑) CEO Brian Moynihan
“Excluding OTC test kits, same-store front store sales were down about 2%, reflective of a general softening of consumer demand.” — CVS Health (CVS 0.00%↑) CFO Thomas Francis Cowhey
"It's telling where the customers pocket book is right now. They're sort of being stingy. And so that period of time in which they will continue to be stingy, we will not see the sales that we were used to prior to that, all right." — Ark Restaurants (ARKR 0.00%↑) CEO Michael Weinstein
"I would say we are seeing some commentary of consumers being more choosy..." — e.l.f. Beauty (ELF 0.00%↑) CEO Tarang Amin
Lower income consumers are the most pinched
"The lower sort of half of consumers, maybe even the lower 3 quarters. I mean you can read the data is all out there. They had bank accounts and checking accounts, pull the money coming out of COVID, they've spent all that money. They're now borrowing more. And so they have less available -- less disposable income and capacity to do anything, including travel, you go up to the upper echelons and people still have pretty fat bank accounts and checking accounts and wherewithal. And so what the impact of that is some continued normalization on leisure transient." — Hilton Worldwide (HLT 0.00%↑) CEO Christopher J. Nassetta
If rates don't go lower, we could see a recession
"They've told people rates probably aren't going to go up, but if they don't start taking them down relatively soon, you could dispirit the American consumer. Once the American consumer really starts going very negative, then it's hard to get them back." — Bank of America (BAC 0.00%↑) CEO Brian Moynihan
The high cost of capital has definitely been a drag on the economy
"I just think the high cost of capital environment, we're now sitting at a delta of about 3 percentage points between the inflation rate and the interest rate. And so that's a pretty big -- that's a very restrictive environment from a capital -- cost of capital perspective, has kept frankly investors from having a huge appetite to come in and take in and underwrite risk deals." — Nasdaq (NDAQ 0.00%↑) CEO Adena T. Friedman
"The lag effect of restrictive monetary policy is pressuring interest rate-sensitive private construction demand more than previously anticipated...we expect slower shipment trends to persist in the year's second half." — Martin Marietta Materials (MLM 0.00%↑) CEO Howard Nye
"Everyone's expecting rates are going to fall. So, we're deferring those projects." — The Home Depot (HD 0.00%↑) CEO Ted Decker
The Fed sounds ready to start lowering rates
"I’m open to something happening in terms of us moving before the fourth quarter...Now that inflation is coming into range, we have to look at the other side of the mandate, and there, we’ve seen the unemployment rate rise considerably off of its lows...We’ve been saying for a long time that we want to see the numbers come in to give us more confidence that we’re sustainably on the path to 2 percent and I have to say, the numbers that have come in in the last several months have given me greater confidence that we’re sustainably on that path." — Atlanta Fed President Raphael Bostic
But may lower more slowly than people expect
"Should the incoming data continue to show that inflation is moving sustainably toward our 2% goal, it will become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive on economic activity and employment. But we need to be patient and avoid undermining continued progress on lowering inflation by overreacting to any single data point." — Federal Reserve Governor Michelle Bowman
Have we won the war on inflation?
"We've won the war on inflation, it's come down. It's not where people want it yet, but we got to be careful that we don't try to get so perfect that we actually put us in recession." — Bank of America (BAC 0.00%↑) CEO Brian Moynihan
Labor cost may still be a source of inflation
"The biggest area that we have problems with, honestly, is dishwashing. Dishwashers are hard to find at the hourly cost that we’re prepared to pay. And so the turnover is great, and if we can find something that can alleviate labor, we would do it." — Ark Restaurants (ARKR 0.00%↑) CEO Michael Weinstein
"Clearly, inflation is abating, though it's still at a later level, but clearly abating. I think from where we sit today, the main area of inflation now is really in the labor of things." — Amcor (AMCR 0.00%↑) CFO Michael Casamento
Rates may not go back to where they were
"The reality is our team, and most people think we'll set them with three, three and a half percent Fed funds rate, which is much different than the last 15, 17 years people have lived it. So people came into the business world in 2007, 2008 have not seen this kind of interest rate environment. And so we're getting back to normal, and that's going to take a while for people to adjust to." — Bank of America (BAC 0.00%↑) CEO Brian Moynihan
Keep an eye on the election cycle
"The other thing we did want to acknowledge is that with the election cycle happening here, we are at least cognizant of volatility...they can become, I guess, I need a good adjective for this. Trying to find a euphemism for a little bit less predictable. That's the way to say it." — Moody's (MCO 0.00%↑) President Stephen T. Tulenko