As highlighted previously (see article), there is a remote chance that the US is currently in recession. However, the approaching fiscal cliff could certainly tip the economy over the edge, a scenario front and center on the minds of CEOs, evidenced by the following recent quotes:
Honeywell
[HON] Earnings Call 7/18/12:
“I would say it's tough to know how things are going to evolve in a political environment but, as you know, I've been very vocal about CEOs needing to speak up here because just seeing how the debt ceiling discussion evolved a few months ago, none of us in the business community ever expected that they could be that reckless overall. And as we look at the fiscal cliff, that's an even bigger looming issue, and it's important for all of us to be speaking up now to make sure that politicians get it, that this is not just a political advantage issue they're dealing with, but they're dealing with lives of a lot of people as they to-and-fro on this stuff. So I think that's one of the things that's contributing to uncertainty amongst all companies when it comes to – do you want to hire, do you want to invest. So I think there's a greater chance of an overall slowdown if we don't start to see some thoughtful movement and discussion about what are they actually going to do. So I would say it's less of a specific Honeywell item than it is an overall tone that starts to evolve in the economy if everybody starts thinking they could be reckless again.”
UPS
[UPS] Earnings Call 7/24/12:
“In the U.S., uncertainty stemming from this year's elections and the looming fiscal cliff constrains the ability of businesses to make important decisions, such as hiring new employees, making capital investments and restocking inventories. This will further restrict economic growth. In fact, this is already evident as June's Manufacturing ISM and growth and retail sales numbers were the worst we've seen since 2009. In addition, employment gains have started to slow down, all of which have a negative impact on commercial volume growth...”
As we get closer to the fiscal cliff, there's just more uncertainty out there than ever. It's hard for me to see how that's going to turn around until we get some policy making done in Washington. We have a three, four, five year horizon. People cannot make decisions without that. So I think it's going to get tougher before it gets better.”
“...the lion's share of our customers are small business. And when you talk to them, they're very much concerned with all that's going to happen at the end of this year with the fiscal cliff. And we all read the impact if all of Bush tax cuts go away and the sequestration hits and you could have a 4% impact. Our customers read that...customers are concerned. They're not going to invest, they're not going to hire people, they're not going to stock inventory with all that uncertainty.”
AutoNation
[AN] Earnings Call 7/19/12:
“I think the only questionable period or risky period is how the year closes, and nothing to do with the automotive recovery or underlying drivers, just simply the election and the fiscal cliff and all the real drama that will come with that...”
“So all the signs are there that housing is going to improve and that will be very beneficial going into next year. Ultimately, to get the final leg to 16 million, at some point, you need an economy that's growing more than 2%. And I think that's going to take resolution around the fiscal cliff issue, remove that big cloud of uncertainty that's sitting over the U.S. economy.”
Eaton Corp.
[ETN] Earnings Call 7/23/12:
“There's been quite a bit of buying of new trucks end of last year and first half of this year. In our talking with dealers and key fleets, they're looking at the fiscal cliff at year-end and they're saying I'll wait. And I want to see how that's going to sort out. I think the issue that we're all reading about every day and that many of us are worried about, the fiscal cliff has very relevant potential impacts on what's going to happen for capital goods and personal purchases as we get out to the end of the year and we hear it back from a number of customers and a number of markets and so the closer we get to that, I think the more people will be concerned.”
Norfolk Southern
[NSC] Earnings Call 7/24/12:
“...the ongoing news coming out of Europe, which seems to not get better but continuing to be very concerning that's different this summer than last. But, from our customer perspective, I think in a macro sense, everyone is concerned and Wick has certainly highlighted this; from a macro perspective, the election, the fiscal cliff, the uncertainty associated with that, that's all a backdrop that we didn't have as much of that last year.”
Papa Johns
[PZZA] Earnings Call 8/1/12:
“Our best estimate is that the Obamacare will cost about $0.11 to $0.14 per pizza or $0.15 or $0.20 per order from a corporate basis.”
Texas Instruments
[TXN] Earnings Call 7/23/12:
“Even though we believe inventory of TI products is low at our OEM customers and distributors, both are reluctant to place new orders and commit to backlog given the uncertainty in the overall economic environment.”
Domino’s Pizza
[DPZ] Earnings Call 7/24/12:
“I think that the U.S. consumer is still pretty darn conservative. And until we get some of the uncertainty resolved around the economy and taxes and et cetera, I think the consumer is going to stay pretty conservative.”
Safeway
[SWY] Earnings Call 7/19/12:
“I think that what's happening is that there is so much uncertainty in the economy that, that is contributing toward a consumer that is very, very cautious...So you have to X-out that 20%, 25% that feels confident, is maybe seeing some recovery in their net worth, hasn't lost their job, doesn't think they're going to lose their job and it's the high-end retailers and everything is going fine for them. But for the other 75% of the economy, they believe they're in a recession. It doesn't matter what GDP says.”
