Yahoo Finance
Recession Watch heats up as Fed moves to tamp down inflation: Morning Brief
Brian Sozzi · Executive Editor
9 min read

In This Article:

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, May 9, 2022

Today's newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Sometimes in life things are blatantly obvious.

You blow a tire after doing 90mph on a highway, and a pitstop to the local tire store is in the cards. Drink 10 cups of coffee before noon, and you'll probably need to use the bathroom at least twice before 1:00 p.m.

Fall down the stairs, and you'll likely get scuffed up somewhere.

This fact is why it’s becoming obvious — at least to grizzled finance veterans — that the economy is likely headed into a recession before 2023 ends. There are a few factors underlying this view.

First, inflation is getting worse and in turn, zapping consumer purchasing power. And by getting worse, I mean growth rates are accelerating and touching fresh highs for companies. Moreover, the executives getting paid big bucks to project when inflation may top out, have no visibility into when it may happen.

Couple new examples from my chats with executives:

“We are hedged a lot, more than normal, but it’s not clear we have hit the peak just yet," Constellation Brands CEO Bill Newlands told Yahoo Finance Live (video above). "But it’s not clear we have hit the peak just yet. We think it’s going to be high inflationary pressures throughout our fiscal year. I think you see it in things like transportation, particularly things like trucking. You are seeing it in some commodity goods input costs. We see it in glass as an example. But certainly inflation is going to be a challenge throughout the year.”

Hostess Brands CEO Andy Callahan told Yahoo Finance: "I am not in a position to call the peak. I thought we may be able to have said that last year. When we started the year, we thought inflation would be up double digits. We have now revised that forecast to be more in the high teens. We are seeing it across a broad basket. We have seen it in our commodities like wheat and other things we cover. We are seeing it in our fuel costs and transportation. We are seeing it in packaging. So it's difficult for me to see the peak now."

And here's Kellogg CEO Steve Cahillane: “We're seeing right now an acceleration in inflation. When we look even to 2023 we don’t really see bright skies yet. So it’s going to be a challenge going forward for the world.”

A customer walks down the coffee and breakfast cereal aisle on the opening day of the new Walmart Neighborhood Market in Panorama City, California, a working class area about 13 miles (20km) northwest of Los Angeles, on September 28, 2012. Smaller than Walmart's SuperCenter, the Neighborhood Market resembles a traditional supermarket, selling food, health and beauty products and home cleaning supplies. AFP PHOTO / Robyn Beck (Photo credit should read ROBYN BECK/AFP/GettyImages)
A customer walks down the coffee and breakfast cereal aisle on the opening day of the new Walmart Neighborhood Market in Panorama City, California, on September 28, 2012. (Photo credit should read ROBYN BECK/AFP/GettyImages) · ROBYN BECK via Getty Images

Inflation appears to be spreading from the goods sector to services sector – which naturally further zaps consumer purchasing power.

Terms and Privacy Policy
Your Privacy Choices
Utah Privacy Notice

Recommended Stories