Sales, Earning Estimates Contract First Time Since 2009; US Back in Recession?

US Back in Recession?

Large US corporations posted their first decline in both earnings and sales since the great recession. Are we back in recession?

That depends on who you ask. Let's kick off the debate with the Wall Street Journal article U.S. Companies Warn of Slowing Economy.

Quarterly profits and revenue at big American companies are poised to decline for the first time since the recession, as some industrial firms warn of a pullback in spending.

From railroads to manufacturers to energy producers, businesses say they are facing a protracted slowdown in production, sales and employment that will spill into next year. Some of them say they are already experiencing a downturn.

“The industrial environment’s in a recession. I don’t care what anybody says,” Daniel Florness, chief financial officer of Fastenal Co. , told investors and analysts earlier this month. A third of the top 100 customers for Fastenal’s nuts, bolts and other factory and construction supplies have cut their spending by more than 10% and nearly a fifth by more than 25%, Mr. Florness said.

Caterpillar Inc. last week reduced its profit forecast, citing weak demand for its heavy equipment, and 3M Co. , whose products range from kitchen sponges to adhesives used in automobiles, said it would lay off 1,500 employees, or 1.7% of its total, as sales growth sagged for a wide range of wares.

The weakness is overshadowing pockets of growth in sectors such as aerospace and technology.

Profit and revenue are falling in tandem for the first time in six years, with a third of S&P 500 companies reporting so far. Analysts expect the index’s companies to book a 2.8% decline in per-share earnings from last year’s third quarter, according to Thomson Reuters.

Sales are on pace to fall 4%—the third straight quarterly decline. The last time sales and profits fell in the same quarter was in the third period of 2009.

Wal-Mart recently warned its sales this year are likely to be flat, down from projection of as much as 2% growth, and cut its earnings forecast for next year as it raises wages. The retailer blamed the strong dollar for the weakening sales growth.

And truckload carriers have warned that they aren’t witnessing the usual uptick in retailer demand as the holiday season approaches, thanks to stubbornly high inventories, said Alex Vecchio, a transportation analyst at Morgan Stanley. “Transportation companies are typically a leading indicator, and our data is not good,” Mr. Vecchio said.

Sales, Earning Estimates Contract First Time Since 2009



Small to Medium Businesses Struggling

The above report ties in nicely with my Sunday morning post Gardner Business Index Shows Small to Medium Sized Businesses Struggling Most

Gardner Business Index by Company Size



Gardner Metalworking vs. ISM



Gardner Durable Goods vs. ISM



For a description of Gardner Business Media, please see Alternative ISM for Metalworking, Plastics, Composites Suggests Economic Contraction.

Even Large Corporations Suffering

The Gardner Business Index sank deeper into contraction, led by small to medium-sized companies. But as the Journal reports, only select companies are doing well, not all large corporations in general.

Caterpillar turned in miserable earnings. One can brush that off, blaming the slowdown in China and the commodity producing countries.

One can brush off WalMart as wage-related.

But what is one to do with a slowdown in transportation companies?

US Recession Still In Play

My 2015 US recession call is still in play.

Is it  possible to have a sales' recession, an earnings' recession, a manufacturing recession, and a transportation recession, but no official recession?

Given the lagging nature of recession calls, it may be a while before we find out.

For an amusing perspective on inaccurate recession forecasts, please see Herman Stekler Award for Bold, Inaccurate Recession Forecasting: 2015 Lakshman Achuthan of ECRI; Mish 2016?

Mike "Mish" Shedlock