The earnings results suggest that consumer slowdown concerns are overstated by Investing.com

Investing.com – In an assessment of Q2 corporate earnings published on Sunday, analysts at Goldman Sachs indicated that concerns about a slowdown in consumption were overblown.

Their research, which focused on 93% of companies that reported earnings, provides a deep dive into macroeconomic insights drawn from micro-level data.

According to GS analysts, revenue growth is stabilizing at a healthy 2.4% year-over-year pace for the second quarter in a row. This rate closely aligns with their estimate of potential near-term GDP growth, reinforcing that economic activity remains robust.

Contrary to popular investor narratives this earnings season, which suggested a severe decline in consumer health, particularly among lower-income groups, Goldman Sachs’ findings offer a more optimistic view.

Their sentiment analysis of consumer discussions on earnings calls showed an improvement, and they note that real earnings growth remains positive across all income groups. This suggests that the consumer market is more resilient than some bottom-up reports have indicated.

The impact of electoral uncertainty on capital expenditure (capex) is another key takeaway from the Goldman Sachs analysis. Analysts noted that talk of the upcoming election began to influence management decisions earlier than in past cycles.

This uncertainty has led some companies, particularly those in the financial, government contracting and Deinflation Act sectors, to delay investment decisions until after the election.

This sentiment was reflected in a 5 percentage point increase in lower investment for companies citing election uncertainty. However, these companies also anticipate a significant post-election acceleration in investment growth.

The labor market, according to the report, appears fully rebalanced, with claims of labor shortages and costs returning to pre-pandemic levels. While some investors worry that the rebalancing may have gone too far, Goldman Sachs analysts note that mentions of layoffs in earnings calls have also fallen to pre-pandemic levels.

This aligns with broader labor market signals such as low initial jobless claims and JOLTS data on layoffs.

Goldman Sachs analysts also highlighted continued positive growth in real incomes, dispelling exaggerated fears about the financial health of the American consumer. They also recognize the marginal impact of electoral uncertainty on business investment and recognize a balanced labor market.