These Two Red Flags Could Spell Big Trouble For The Economy

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Will Kessler Contributor
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A major shipping company and the largest advertising firm in the world both announced in their second quarter financial reports on Friday indicators that could point to future economic trouble, according to Reuters.

Danish shipping and logistics company Maersk announced in its second quarter financial report that it was adjusting its industry growth predictions to a growth range of -4% to -1% for global container volume, and the British multinational advertising company WWP announced in its second quarter a decline from technology clients as Big Tech pulls back. The announcements indicate that companies are pulling back on expectations following higher interest rates and recession concerns in both Europe and the U.S., according to Reuters. (RELEATED: Jobs Market Cools Following Unexpectedly High Economic Growth)

“Spend[ing] will pick up after a period of time, but [I] think we are nervous for the rest of the year because we can’t get total clarity on when that’s going to happen,” WPP Chief Executive Mark Read told Reuters.

WPP follows the report from rival marketing firm Interpublic, which lowered its growth forecast due to tech clients cutting marketing budgets, according to Reuters. Marketing spending is one of the first places where spending is cut when companies are trying to save money.

The lowering of Maersk’s estimate for container volumes represents an estimate of lowered global container trade for the year due to reduced inventories from companies, according to Reuters.

The U.S.’ credit rating was downgraded on Tuesday by major credit agency Fitch Ratings from “AAA” to “AA+,” meaning a loss of perceived trustworthiness by the agency toward the U.S. Fitch Ratings predicted a recession starting in the fourth quarter of 2023, which it thinks will last into the first quarter of 2024.

“Corporations are in wait-and-see mode when it comes to splashing the cash and handing margin over, at a time when demand is very tough to profile,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, told Reuters.

Economic growth was above expectations for the second quarter of 2023 at 2.4%, but other factors still worry economists, including rising government debts and consumer durables and nonresidential fixed investments falling.

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