3 warning signs about the economy seen in corporate America : NPR
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At first look, American companies seem to be doing just fine in the face of high inflation and rising interest rates. But look underneath the surface, and there are potential warning signs about the economy – and it’s got the country’s top executives feeling a little bit nervous.
So far, 453 of the top 500 companies comprising the S&P 500 have reported earnings and about 75% did better over the April to June quarter than Wall Street expected, according to S&P Dow Jones Indices.
It’s a remarkable show of strength given they had to navigate a challenging economic environment — a time when the country was dealing with its highest inflation in around 40 years and the Federal Reserve was hiking interest rates.
The stronger-than-expected earnings, along with hopes the Fed won’t be as aggressive with rate hikes going forward, have helped fuel a powerful rally on Wall Street.
But top executives say they are facing lot of uncertainty at a time when there are growing fears of an economic recession. They’re not panicking, but they are being careful.
Here are three signs that could point to potential trouble ahead for the U.S. economy.
Companies are cutting advertising
Historically, when companies are anxious about the future, they cut their ad budgets, making it a leading indicator about how companies view the economy.
That’s what happened in the last quarter.
Social media companies have seen ad sales slow, and that dragged down their earnings. In the second quarter, Meta, Facebook’s parent company, saw its revenue fall for the first time ever.
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