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America’s Largest Companies are Showing Warning Signs for the US Economy

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America’s Largest Companies are Showing Warning Signs for the US Economy

US — Although controversial, the US economy now falls within the definition of a technical recession. For the first half of 2022, the largest economy in the world has experienced an economic slowdown for two consecutive quarters — this year’s first and second quarter, respectively. Despite this, Biden’s government continues to downplay the economic situation in the country and assures all of its stakeholders that the US economy remains resilient and firm in the face of growing uncertainty and a looming grim outlook for the year’s latter half.

One of the key drivers of any capitalistic economy is the economic production from the private sector, particularly the largest private entities such as publicly-listed companies and group of companies that also drive a nation’s financial markets. This is particularly the case with the US being at the forefront of this economic model. Therefore, based on these companies’ financial performance, we could gauge where the US economy could be heading—making it a reliable indicator of the current and future economic environment.

Warning Signs are Beginning to Present Themselves

Just last week, Walmart made a statement following its most recent quarterly report. According to the company’s CEO, Doug McMillon, in light of the tightening economic landscape, consumers are now beginning to be more conservative with their spending, saying, “The increasing levels of food and fuel inflation are affecting how customers spend.”

Following shortly, Unilever’s CEO, Alan Jope, also expressed the challenges brought by the current economic dilemma, saying, “The threat of recession is starting to impact consumer confidence and change spending patterns and behaviors.” Moreover, both Costco and McDonald’s have started raising their prices in lieu of the current high inflation situation. AT&T, on the other hand, has also reported that there has been a sudden increase in late payment by its subscribers in the 2nd quarter.

Best Buy has also pointed out that its electronics offering is experiencing a massive slowdown in demand. In a statement following its financial results for the 2nd quarter, the company’s CEO, Corie Barry, remarked, “As high inflation has continued, and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further, leading to Q2 financial results below the expectations we shared in May.”

Adding to this, Target is also experiencing a bloating inventory in some of its segments, including electronics, home accessories, and appliances, as demand for these goods continues to dry up. Because of this, the company has started to give massive discounts on some of its items to get rid of the surplus in its inventory.

Tech Giants Facing the Same Predicament

As businesses and individuals expect a further slowdown in demand, they would typically look for areas to cut costs; one of these areas is advertising and promotion. Meta, the company behind Facebook, and Snap, the company behind Snapchat, have both experienced a hit in their advertising revenue segment.

The technology sector has mainly been unscraped from the pandemic and the effects it has brought to the overall economy. In fact, many tech companies have seen unprecedented growth and massive earnings during the health crisis. However, the sector does not seem to hold its status of being an “outlier” during the current economic predicament this year —  a yet another warning sign for the US economy.

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