Airbnb "Concerns Over Slowing U.S. Consumer Demand"
Olympics and Summer Season Lead to Q3 Consensus Revision
Airbnb Stock Plummets 16% in After-Hours Trading
MarketWatch: Adds to U.S. Consumer Weakness Narrative
McDonald's, Starbucks Also See Consumer Slowdown
Criticism Over No July Interest Rate Cut
As companies that serve as barometers of U.S. consumer spending consecutively detect signs of slowing customer consumption, concerns about a real economic recession are emerging. Criticism is mounting that the U.S. central bank, the Federal Reserve (Fed), should have proactively lowered interest rates.
On the 6th (local time), the lodging reservation platform Airbnb announced second-quarter earnings below market expectations and warned that "there are signs of weakening demand among U.S. consumers." Airbnb's second-quarter revenue rose 11% year-over-year to $2.75 billion, surpassing market research firm LSEG's estimate of $2.74 billion, but its earnings per share (EPS) of $0.86 fell short of the expected $0.92.
Airbnb diagnosed that the 'booking lead time,' which refers to the number of days between the reservation date and the actual arrival, is shortening. Major foreign media explained this as "meaning that consumers are hesitating and being cautious about spending."
Airbnb forecasted third-quarter revenue, which includes the summer vacation season, to be between $3.67 billion and $3.73 billion. This is lower than the market consensus estimate of $3.84 billion. Despite the quarter featuring global events such as the Paris Olympics, signs of weakening U.S. consumer demand were detected, significantly impacting consensus adjustments. Airbnb's stock price plunged about 16% in after-hours trading.
MarketWatch analyzed Airbnb's earnings as strengthening the narrative of weak U.S. consumer demand. MarketWatch added that companies like McDonald's, Starbucks, and Clorox, which also reported second-quarter earnings earlier, raised concerns about slowing consumption. This is attributed to customers primarily seeking discounted products or inexpensive meals amid entrenched high inflation.
The world's largest airline, American Airlines, also reduced airfare on the 26th of last month. It was reported that there were many empty seats despite the travel peak season due to the Paris Olympics.
Signs of consumption slowdown detected through the U.S. corporate earnings season are adding weight to recession fears that surged following the U.S. employment shock announced on the 2nd. The U.S. unemployment rate in July was 4.3%, the highest since October 2021, and nonfarm payrolls increased by only 114,000 in the same month, the lowest figure since January 2021.
Experts, including William Dudley, former president of the New York Federal Reserve Bank, have diagnosed that the Federal Reserve (Fed) should bring forward the pivot (direction change) point amid recession concerns, but policymakers such as Fed Chair Jerome Powell have emphasized that they will not rush to ease interest rates. This has been criticized as a painful oversight by the Fed.
Wall Street is forecasting a significant rate cut in September that will exceed previous expectations. JP Morgan has even speculated that the Fed might take emergency rate cuts.
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