General Motors CEO Mary Barra speaks during a visit by the U.S. President to the General Motors Factory ZERO electric vehicle assembly plant in Detroit, Michigan November 17, 2021.
Almond Ngan | AFP | Getty Images
As 2023 approaches and the prospect of a recession looms, American businesses are bracing for a slowdown in consumer spending.
CEOs of major companies including Walmart and General Motors joined CNBC’s “Squawk Box” on Tuesday morning to discuss inflation, interest rates, geopolitics and what it all means for their prospects in the new year.
Here’s what they said:
Jamie Dimon, JPMorgan
Rising interest rates, record inflation, geopolitical pressures and other factors could lead to a recession, JPMorgan Chase CEO Jamie Dimon told CNBC.
Savings and government aid during the pandemic are helping to keep consumers’ wallets stable, but inflation and interest rate hikes are “eating away,” he said.
The CEO predicted that increased consumer spending would not last much longer in 2022 and underscored the risk of rising interest rates as the Fed works to curb inflation.
This year’s geopolitical upheavals, including the war in Ukraine and strained trade with China, are also among the “storm clouds” Dimon is watching. As the dollar strengthens, he noted that international trade for something like oil will continue to get more expensive as weaker currencies are forced to make up the difference.
“If you look ahead, these things could derail the economy and cause this mild to severe recession that people are worried about,” Dimon said. “It could be a hurricane. We just don’t know.”
Mary Barra, GM
Mary Barra, CEO of General Motors, expects economic headwinds in the next year, but is not yet sounding any recession alarms.
“I’m not going to declare a recession, economists have to do that,” Barra told CNBC. “But right now we’re still seeing a pretty strong consumer.”
Nevertheless, the carmaker is proceeding cautiously in order to be prepared for a possible slump in demand other industries have seen. During the pandemic, when consumers were spending less on travel and services, some industries saw increased demand and were surprised when that demand later disappeared.
Barra said GM is preparing for “a fairly conservative 2023” cost-wise to avoid being caught off guard, but that she still sees a “pent-up demand” lingering from the pandemic.
Barra also expects the troubles of the pandemic, such as semiconductor shortages and strained supply chains, to persist into 2023 despite quarterly improvements.
Doug McMillon, Walmart
Walmart CEO Doug McMillon doesn’t want a recession, but he thinks it could be a necessary evil to ease inflation for his customers.
“We have some more price-sensitive customers who have been under inflationary pressure for months,” McMillon said. “Should the Fed do what it has to do, even if it’s a much harder landing than we’d like? I think inflation needs to be addressed.”
Though Walmart still sees high spending, McMillon has noted more conservative spending in certain categories like electronics and toys.
Walmart has seen its pandemic-era staffing woes ease as it has raised wages, but McMillon noted there is still hiring pressure at the cashier level. Should a severe recession hit, McMillon made sure Walmart wouldn’t resort to downsizing.
“Customers and members need to be served in order for us to increase our headcount. Growth is likely to continue,” said McMillon.
Scott Kirby, United Airlines
United Airlines CEO Scott Kirby told CNBC that his company is heading into the year optimistically but that 2023 could see a “mild Fed-induced recession.”
Business travel has been steadily recovering since the pandemic-era collapse, but Kirby said traveler demand is stagnating, which could indicate “pre-recession behavior.”
And even though the industry is in the “eighth inning” of Covid recovery, Kirby says it’s still grappling with issues left over from the pandemic, such as: B. Shortage of pilots and expensive fuel.
For now, airlines have been reaping the benefits of hybrid working as the rise of remote work gives people more flexibility when traveling, Kirby said.
United remains positive as revenue numbers continue to climb. Kirby said the company is “coming back to almost all profit margins.”
“If I wasn’t watching CNBC in the morning — which I do — the word recession wouldn’t be in my vocabulary,” Kirby said. “You just can’t see it in our data.”
Lance Fritz, Union Pacific
Shipping is slowing, Union Pacific Railroads CEO Lance Fritz told CNBC, a sign that consumer spending is slowing and the economy is picking up.
“The housing market has slowed down significantly and parcel wrapping has slowed down significantly and we’re seeing that with paper and parcel shipments,” he said.
Fritz left it to the Fed to decide whether it’s worth reining in inflation to put pressure on consumers’ wallets — and potentially trigger a 2023 recession. As interest rates continue to rise, spending and demand will certainly fall, he said.
“The Fed is trying to put us all in the firing line with a slower economy and slowing demand. That’s not good,” said Fritz.