What recession? Global consumer giants boosted by spending, higher prices

NEW YORK (Reuters) - Major global consumer-facing companies like McDonald's, General Motors and Nestle posted mostly buoyant results on higher prices, showing how consumers across major economies are still spending despite slowed economic activity.

Shoppers have absorbed price increases for soda, appliances and other goods, offsetting concerns among investors that companies in Europe and the United States are set for a second consecutive quarter of declining earnings.

Consumers have more wiggle room in their budgets, said Ben Ayers, senior economist at Nationwide Economics, pointing to an increase in the use of revolving credit, along with the still-resilient job market.

U.S. automaker General Motors Co lifted its full-year profit expectations Tuesday, saying demand has been stronger than forecast. Even though electric vehicle leader Tesla has been slashing prices to spur demand, GM was able to increase average wholesale prices for North American deliveries by $1,800 per vehicle.

"We feel really good about where we are priced right now and consumers seem to be demanding our products," Chief Financial Officer Paul Jacobson said during GM's conference call.

Other companies also posted strong results based on robust pricing. Switzerland-based Nestle SA, the maker of Purina pet foods, increased prices by nearly 10% during the quarter even as sales volumes fell 0.5%.

Similarly, beverage giant Coca-Cola Co said average selling prices rose by 11%, while rival PepsiCo Inc said its prices gained 16% in the first quarter.

"Companies did not increase their business; they just were able to pass their costs and maintain their business," said Jack Ablin, Cresset Capital chief investment officer.

The U.S. personal savings rate as a percentage of disposable income was 4.6% in February, according to Bureau of Economic Analysis, and while that's not as high as during the first years of the pandemic, that figure is better than most of 2022, Ayers said.

Company executives, however, said that inflation is hitting customers, particularly in Europe. McDonald's Corp sales rose 12.6% worldwide for the quarter, beating expectations, but company CFO Ian Borden said "elevated cost inflation continued to put significant pressure on restaurant cash flows, particularly for our European franchisees."

Shoppers in Europe have struggled more with higher prices, and that may pinch sales in coming quarters if inflation does not abate.

"There is uncertainty on how the consumer environment may ultimately play out in 2023," Coca-Cola Chief Executive James Quincey said on a call with investors.

(Reporting by Doyinsola Oladipo in New York; additional reporting by Joe White in Detroit, Hilary Russ in New York and Ananya Mariam Rajesh in Bengaluru; editing by Jonathan Oatis)

By Doyinsola Oladipo