Obsessive recession watch gives way to strong corporate earnings
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Sarah Grillo/Axios
The maybe-things-won't-be-so-bad-after-all narrative is playing out in earnings season, with a slew of major American companies remaining resilient despite fears of a downturn.
Why it matters: The recession watch has become positively obsessive as observers look for clues that the economy is growing increasingly wobbly.
The latest: Several major earnings reports on Tuesday suggest a recession may not be imminent at all:
- General Motors reported fourth-quarter revenue up 28.4% and net income up 14.8%, outpacing expectations.
- UPS stock jumped 5% in early-afternoon trading after the company said it met its earnings targets despite consumers shifting from goods spending to services.
- McDonald's U.S. comparable sales rose 10.3% in the fourth quarter, powered by increased foot traffic and promotions like the adult Happy Meal.
Other issues that once served as obstacles for the economy are also clearing up, such as the supply chain crisis.
- Caterpillar CEO Jim Umpleby said Tuesday that the company now enjoys "the highest level of parts availability in our history."
The big picture: The resilient U.S. economy was part of the reason why the International Monetary Fund raised its global growth outlook on Monday, saying it expects growth of 2.9% in 2023, up from a previous expectation of 2.7%.
- The IMF now expects the economy to rebound in 2024, with its chief economist Pierre-Olivier Gourinchas saying "a global recession is not in our baseline," Axios' Rebecca Falconer reports.
- And inflation is "peaking," with 84% of countries forecast to face lower headline inflation in 2023 compared to 2022, according to the IMF World Economic update.
Yes, but: The economy isn't exactly rock solid as the housing market has slowed down and consumers are exhausting their savings to maintain their level of spending.
- “The last bastion of strength is the labor market, but I don’t think it can withstand all these other forces,” Nationwide Chief Economist Kathy Bostjancic told the Wall Street Journal.
The bottom line: The recession watch will continue, but it doesn't look like one is imminent.
