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What CEOs Are Saying About the Possibility of a Recession

Bloomberg logoBloomberg 2/2/2019 Steve Matthews

Elon Musk wearing a suit and tie: Elon Musk Breaks Ground at Tesla's First Gigafactory Outside the U.S.© Bloomberg Elon Musk Breaks Ground at Tesla's First Gigafactory Outside the U.S. Softening but still solid U.S. demand as well as encroaching signs of global weakness are giving some corporate executives a more cautious view of their companies’ outlook.

While business leaders don’t forecast a downturn, several saw the potential for recession and slowing growth on conference calls during the past week, from automakers to staffing firms.

The caution echoed the Federal Reserve, which held interest rates steady Jan. 30 and dropped its guidance for “further gradual increases” in the face of slowing global growth, market volatility and the longest government shutdown in American history.

Elon Musk

“The economy moves in cycles, and there’s clearly a significant risk of a recession over the next 12 to 18 months,” Tesla Inc. Chief Executive Officer Elon Musk said on an earnings call days after announcing job cuts. “But I’m confident that Tesla will remain to be slightly profitable even if there is a significant recession, and then be all the stronger for it when the recession ends.”

Honeywell International Inc. CEO Darius Adamczyk adopted a similar tone. “While we’re not planning for recession in 2019, we’re taking steps now to ensure we build on our commitments in an uncertain economic environment,” he said.

No Signs

Stephen A. Schwarzman wearing a suit and tie: Opening Day Of World Economic Forum 2019© Bloomberg Opening Day Of World Economic Forum 2019

Stephen Schwarzman

Slower growth is most likely, according to Blackstone Group LP CEO Stephen Schwarzman. “Employment trends remain strong, the consumer is healthy, and there are no visible signs of a recession,” he said. “Regions of the world like Europe and China are facing headwinds including from Brexit and trade issues. Policy makers in those regions are now dealing with the question of how do we adjust monetary and fiscal policy to encourage growth.”

ManpowerGroup Inc. CEO Jonas Prising offered an outlook similar to Schwarzman’s. “Our clients still feel very much like a slowdown and not a downturn,” he said. “Despite concerns around lower growth outlook in some parts of the world the importance of the workforce strategy and access to skilled talent is top of mind for most companies.”

The International Monetary Fund last month cut its global growth forecast for the second time in three months, predicting it will grow at the weakest pace in three years in 2019 and warning fresh trade tensions would spell further trouble. The fund predicts global growth of 3.5 percent this year, less than the 3.7 percent expected in October.

Recession Risk

Economists last month put the risk of a U.S. recession at the highest in more than six years amid mounting dangers from financial markets, trade war and the government shutdown. Analysts surveyed by Bloomberg over the past week see a median 25 percent chance of a slump in the next 12 months, up from 20 percent in the December survey.

The slowdown-without-recession scenario was backed by Whirlpool Corp. CEO Robert Bitzer. “We see consumer confidence and the fundamental drivers of demand being fairly intact,” he said. “There’s some trends or some signs that, in particular, the first-time buyers are coming more into the market.”

a man wearing a suit and tie: Celebrity Edge Cruise Liner Construction Work © Bloomberg Celebrity Edge Cruise Liner Construction Work

Richard Fain

Strength in consumer demand was echoed Royal Caribbean Cruises Ltd. CEO Richard Fain. “Despite all the noise in the economy and the volatility of the stock market, we’ve been impressed with consistent strength in demand from our market,” he said.

Among those citing China’s softening growth was Tupperware Brands Corp. CEO Patricia Stitzel. “Like many others, we are seeing increasingly problematic consumer spending trends in China as their economy slows down,” she said, adding that the company is working to improve training and “diversifying our product offerings in China to reduce reliance on a few key big ticket items.”

To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Jeff Kearns, Alister Bull

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.

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