Analysts expect dismal earnings season ahead

A television host points to a graph on a screen at the New York Stock Exchange on July 6, 2012 in New York City. Markets are pessimistic about the outlook for corporate quarterly earnings this Summer and Fall.



Jeremy Hobson: The big business story of the day will come after the markets close, when the aluminum company Alcoa kicks off America's quarterly corporate earnings season.

And for more, let's bring in Michelle Girard, senior U.S. economist with RBS. She's with us from Stamford, Connecticut. Good morning.

Michelle Girard: Good morning, Jeremy.

Hobson: Well Michelle, what are you expecting from corporate america this season?

Girard: Well you know they've really guided our expectations lower. We're not expecting it to be a very upbeat earnings season. I have to say, I fear that the numbers may be somewhat disappointing. Part of it actually is a stronger dollar, which hurts companies brining earnings back from overseas that have to get translated back into dollars. But let's face it, we are looking at a much softer economic environment. I think that explains why this particular quarter of earnings may be disappointing.

Hobson: Well why are we going to see another one of these years where we had a Spring slowdown, but then things get better in the summer?

Girard: That's exactly been the pattern in each of the last three years. We've come into the year with a lot of strength, lost momentum in the Spring, reaccelerated in the second half of the year. Unfortunately, I don't think that that's likely to playout this year. You know, the biggest factor that I think is going to work against growth here in the U.S. in the second half of this year is the uncertainty over our own fiscal situation. We've talked about the uncertainty over Europe -- obviously has been a factor in the Spring slowdown. But now, we have so many unanswered questions: are the tax rates going to go up at year-end, are the spending cuts going to be put in place? People talk about the so-called fiscal cliff maybe pushing us to the brink of recession. I mean against all of that uncertainty, you can understand why businesses may stay side-lined, at least until the outcome of the November elections when they have more clarity on where the economy is going. 

Hobson: Michelle Girard, senior U.S. economist with RBS, thanks so much.

Girard: Thank you.


About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.


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