Companies have plenty to worry about, but inflation is one concern that is fading amid falling Consumer Price Index numbers. According to a study by FactSet Research Systems, mentions of the word “inflation” shrank by almost one-half in the year’s second-quarter earnings conference calls of S&P 500 companies, compared with two years before.
In calls about this year’s June-ending quarter, the word came up 235 times, down from 297 in 2023’s second quarter and from 411 in 2022’s comparable period. The 2024 second quarter’s mention of the word is the second lowest number since 2021’s second quarter (216), shortly before inflation began to ascend. The 10-year average ending in this year’s second quarter was 182, wrote John Butters, FactSet’s senior earnings analyst, in the current report.
To be sure, post-pandemic inflation, while slowing lately, is far down from 2010 until the appearance of COVID-19 in 2020. From 2014 through 2019, CPI increases ranged from just below 1% to around 1.5%.
According to the U.S. Bureau of Labor Statistics’ August report, the CPI rose 2.5% year over year, a big improvement from the recent peak of 9.1% in June 2022. Up until then, Fed Chair Jerome Powell, who had been holding the fed funds rate at or near zero since the pandemic struck, had insisted that increasing inflation was “transitory.”
Corporate America still is wary of inflation, despite its recent ebbing, according to FactSet’s analysis. Its report cited remarks by Darden Restaurants Inc. Chief Financial Officer Raj Vennam, on its June 20 call. Per FactSet, Vannam said the restaurant chain expects 3% inflation for its fiscal year (which ends next May), including commodities price hikes averaging 2% and labor costs averaging 4%.
In sector terms, consumer discretionary—including restaurants—was hardly where the largest number of inflation references came on calls. Financial services was the leader, with 43 mentions. That makes sense, because inflation is the catalyst for interest rate moves, and financial firm management teams keep a wary eye out for any possible upward moves.
Next, with 41 mentions, was industrials, likely due to manufacturing’s heavy use of commodities, an asset class whose prices follow inflation, too. Energy had the second-fewest references to inflation, with five (community services had none). Oil and gas prices are dominant forces in creating inflation, and thus likely are not as subject to it as other businesses might be.
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Tags: Commodities, Darden Restaurants, Earnings, energy, FactSet, Federal Reserve, Inflation, Jerome Powell, John Butters, Pandemic