Cost-cutting is expected to be an ongoing trend for large companies this year, and many have already announced layoffs, store closures and other plans to lower expenses.
Some companies, including automakers, airlines and media firms, are grappling with higher labor costs due to new contracts. Others are seeing “cost fatigue” among consumers, says Gregory Daco, chief economist for EY.
“The cost of most everything is much higher than it was before the pandemic, whether it’s goods, inputs, equipment, labor, even interest rates,” he said. “You’re seeing a rebalancing happening in the labor markets, in the capital markets … And that rebalancing is still going to play out and gradually lead to a more sustainable environment of lower inflation and lower interest rates, and perhaps a little bit slower growth.”
Fitch Ratings said it predicts a drop in discretionary spending, although it doesn’t foresee a recession. “Part of companies’ decision to lower their expense structure is in line with their views that 2024 may not be a fantastic year from a top-line-growth standpoint,” said Fitch retail analyst David Silverman.
