The US stock market is unleashed. In the last three months, the S index
Inflation slowed to 2.6% according to the Federal Reserve's preferred gauge, not far from its 2% target. At the end of the year the Federal Reserve will lower its reference interest rate to below 4%, which will be a rocket.
However, on January 31, Federal Reserve Chair Jerome Powell dashed hopes of an imminent rate cut by declaring that inflation was “still too high.” As cheap pandemic-era debt begins to mature, the interest bill on America's mountain of $21 trillion of non-financial corporate debt will continue to rise. Profits are more or less stagnant. In the last quarter of last year (on which they are now reporting) the companies of the S
One source of concern is American consumers. The excess savings accumulated by buyers during the pandemic, thanks in part to government stimulus checks, have already been mostly spent. Credit card default rates have continued to rise.
Consumer goods sellers are bracing for tough times. On January 25, Levi Strauss, the maker of Americans' favorite jeans, said it expected its profits to grow between 1% and 3% this year, below analysts' expectations, and announced the layoffs of between 10% and 15% of the workforce. On January 30, appliance maker Whirlpool announced that it expected its comparable sales to remain stable in 2024. That same day, Mary Barra, CEO of General Motors, the largest US automaker, predicted that the number of Cars sold in the United States would increase 3% this year; It's not bad, but it's a much lower percentage than last year's 12% increase. And prices are expected to fall to bolster demand, leading to squeezed margins just as automakers are digesting higher costs stemming from the new wage deal.
On the other hand, American consumers are switching to more expensive electric vehicles more slowly than manufacturers anticipated. On January 24, Tesla warned that its growth “could be noticeably lower” this year.
Even manufacturers of consumer staples are showing signs of caution. On January 26, Colgate-Palmolive, the toothpaste maker, announced that it expected its sales to grow between 1% and 4% this year, up from 8% last year. On January 30, confectionery and food conglomerate Mondelez estimated revenue growth of 3-5% for 2024, down from 14% in 2023.
A second concern is the situation in China. The collapse of the country's real estate sector has weighed on consumer confidence. In December, Nike's share price plummeted after reports of slowing sales growth in China due to “worsening adverse macro factors.” The order issued on January 29 by a Hong Kong court ordering the liquidation of Evergrande, once the largest real estate developer in China, could further cool the atmosphere. The next day, Laxman Narasimhan, CEO of coffee chain Starbucks, warned that “a more cautious consumer” in China was hampering its growth. And Apple's sales plummeted 13% last year.
The manufacturing boom also appears to be slowing in the United States, which constitutes a third source of concern for next year. In the first half of 2023, monthly factory construction soared 17%, taking inflation into account. In the second half, this growth decreased to 8%. Taiwanese chipmaker TSMC announced on Jan. 18 that it would delay opening a second semiconductor factory in Arizona by one to two years. I had already delayed the first one in July. On February 1 it was reported that US chipmaker Intel would delay the opening of a factory in Ohio.
The reason could be the delay in the realization of the subsidies promised by the Biden administration. Of the $52 billion provided in the CHIPS Act to support domestic semiconductor production, only a small portion has been allocated so far. American automakers are also delaying investments in electric vehicles in response to lackluster demand.
One area of activity that shows no signs of slowing down is artificial intelligence. Amazon, Alphabet and Microsoft (the American cloud computing triumvirate) reported year-over-year growth in their cloud computing divisions of 13%, 26% and 30% in the final quarter of last year; results driven in part by the growing demand for that computing capacity.
All three companies told investors that their high expectations for AI would lead them to increase capital investments this year. On February 1, Meta, which also harbors AI ambitions, reported much higher-than-expected profits and said it would spend up to $37 billion this year, much of it on data centers to train and operate. artificial intelligence models. Unlike what happened with their previous investment frenzy in the underappreciated virtual reality metaverse, this time investors have welcomed the news with enthusiasm; as they have also done in response to the news that the company would buy back more shares and pay the first dividend in its history. The next day, Meta's market value skyrocketed by nearly $200 billion to $1.2 trillion, the largest single-day jump in Wall Street history.
However, it may be some time before the rest of large American corporations see the boost from artificial intelligence on the bottom line. According to a recent survey by consulting firm BCG, only 5% of companies are doing nothing at all with technology. However, 71% are limited to “carrying out limited experimentation and small-scale pilot projects.” As companies run out of fuel, more of these projects may be needed.
