Article 5

The article discusses how businesses are failing. Although there are several causes, the
economic crisis has been identified as the main one. Firstly, the threats to the global economy
appear to have been minimized notwithstanding the conflict in Ukraine. Secondly, the
Chinese delegation provided the strongest signal in years that China is reopening after its
strict "zero-COVID" policy. Central banks have taken inflation seriously. Even though
globalization may not be in the best of health, reports of its collapse seemed overblown. With
profit predictions for major American companies falling more sharply than a black ski run,
the situation on earth appears to be worse. Analysts reduced their predictions for the S&P 500
index's fourth-quarter earnings by 6.5% in the final three months of 2022.
The first thing that businesses would admit is that consumers are weary because they have
curbed their spending on luxuries. This earnings season, however, will see a decrease in the
chorus of executives promoting such "pricing power," as households continue to spend extra
funds amassed during the pandemic while also becoming more price-sensitive. Retail sales
have decreased by 1.1% on a seasonally adjusted level due to the pandemic, with Microsoft
cutting 10,000 jobs and Constellation Brands, Corona beer, Tesla automobiles, and Apple all
taking salary cuts of 40%. Technology businesses are reducing their payrolls and
strengthening their cash flows after last year saw a slowdown in demand for their products
following earlier pandemic-induced highs.
During this earnings season, businesses also outline their budgets for the coming year,
allocating an equal amount to investments and dividend payouts to shareholders. These
payouts were frequently supported by debt in the past, but given the high cost of money, this
borrowing is probably going to decrease. Deal-making is still trying to sort through the mess
left behind by transactions made during the pandemic when prices were at their highest. The
merger boom has caused some corporations to write down their war chests and have an
increased appetite for acquisitions.
Most businesses are still cautious and probably won't make any big expenditure choices until
the current economic unrest subsides. According to IDC, Dell shipped approximately 40%
fewer PCs in the fourth quarter, with the majority of its customers being businesses. In
contrast to its earlier forecast of no more than 8%, Logitech, a manufacturer of keyboards,
webcams, and other desktop-related devices, now anticipates revenues to decline by as much
as 15% in the fiscal year ending in March. Budget constraints for digitization may also have
an impact on hardware and software manufacturers like Intel and Microsoft. Positive earnings
surprises, though, might be the exception this year rather than the rule.
Additionally, businesses are struggling to resist pay increases and convince customers to
absorb higher costs because costs are rising more quickly than revenues. Analysts have not
yet fully absorbed the rate at which margins would be compressed, but they still expect
profits to increase in 2023, we collectively agree to this point.