July 6 (Bloomberg) -- Earnings at such companies as Ford Motor Co. and ArcelorMittal may continue to decline in the next three months as the highest unemployment in a quarter-century keeps consumers from spending.
The year-over-year profit slide for Standard & Poor’s 500 Index members may narrow to 21 percent from July through September, after declines of an estimated 34 percent in the second quarter and about 60 percent in the year’s first three months, according to data compiled by S&P and Bloomberg. Earnings may rise by year-end based on comparisons to late 2008, which was roiled by the meltdown in financial markets.
Consumers in the U.S., the world’s largest economy, remain concerned about jobs after unemployment reached a 26-year high in June, analysts and investors said. Until Americans start spending again on cars, cell phones and clothes, most U.S., Asian and European companies may keep squeezing out costs.
“So long as unemployment keeps rising, the consumer will continue to be very conservative,” said Walter “Bucky” Hellwig, who helps manage $30 billion at Morgan Asset Management in Birmingham, Alabama. “Any improvement will come from cost cutting, and that’s not sustainable. If you have no anticipation of top-line growth -- it will be a little tougher to generate that enthusiasm into the fourth quarter.”
Consumer Confidence
U.S. consumer confidence slipped unexpectedly in June, reflecting unemployment that rose to 9.5 percent and wealth destruction triggered partly by a drop in property values. U.S. employers slashed 467,000 jobs last month, and about 6 million jobs have been eliminated since the recession began in December 2007. June’s jobless rate was the highest since August 1983.
Almost 67 percent of S&P 500 members topped analysts’ estimates for first-quarter earnings after eliminating jobs and closing plants, Bloomberg data shows. That helped the S&P 500 index rally 15 percent in the second quarter, the most since 1998.
