CEOs of Walmart, JPMorgan, GM talk about possible slowdown

As 2023 approaches and the prospect of a recession looms, corporate America is bracing for a decline in consumer spending.

CEOs of major companies including Walmart and General Motors joined CNBC’s “Squawk Box” Tuesday morning to talk about inflation, interest rates, geopolitics and what that means for their outlook in the new year.

This is what they said:

Rising interest rates, record inflation, geopolitical pressure and other factors could combine to trigger a recession. JPMorgan Chase CEO Jamie Dimon told CNBC.

During the pandemic, savings and government aid help steady consumer wallets, but inflation and interest rate hikes “are eroding everything,” he said.

The CEO predicted that rising consumer spending would not last much longer in 2022, highlighting the risk posed by rising interest rates as the Fed tries to rein in inflation.

This year’s geopolitical upheaval, including the war in Ukraine and strained trade with China, are among the “storm clouds” Dimon has observed. As the dollar strengthens, he noted, international trade for something like oil will continue to become more expensive, as weaker currencies are forced to match the difference.

“When you look forward, these things could well derail the economy and lead to this mild to severe recession that people are worried about,” Dimon said. “It could be a hurricane. We just don’t know.”

General Motors CEO Mary Barra expects economic headwinds next year, but isn’t sounding the alarm bells for a recession just yet.

“I’m not going to call it a recession, that’s for economists,” Barra told CNBC. “But right now we’re still seeing a pretty strong consumer.”

Nevertheless, the automaker is moving cautiously to prepare for a potential collapse in demand. saw other industries as well. During the pandemic, when consumers spent less on travel and services, some industries saw increased demand and were caught off guard when that demand later disappeared.

Barra said GM is planning a “fairly conservative 2023” in terms of cost so as not to be blindsided., but he still sees “pent-up demand” lingering from the pandemic.

Barra also expects pandemic challenges such as semiconductor shortages and strained supply chains to persist into 2023, despite improvements each quarter.

Walmart CEO Doug McMillon doesn’t want a recession, but he thinks it may be a necessary evil to reduce inflation for his customers.

“We have some customers who are more budget conscious and have been under inflationary pressure for months,” McMillon said. “Should the Fed be doing what it needs to do, even if it’s a harder taper than we’d like? I think we need to deal with inflation.”

While Walmart still saw strong spending, McMillon saw more conservative spending in certain categories, such as electronics and toys.

Walmart has seen pandemic-era staffing problems begin to ease as it raises wages, but McMillon noted there is still hiring pressure at the cashier level. If a hard recession hits, McMillon assured Walmart will not resort to layoffs.

“Customers and members have to be served, so that’s going to increase our headcount. Growth will probably continue to increase,” McMillon said.

United Airlines CEO Scott Kirby told CNBC that his company is optimistic, but that 2023 could see a “moderate Fed-induced recession.”

Business travel has been steadily rebounding from the slump during the pandemic, but Kirby said traveler demand is plateauing, which could indicate “pre-recession behavior.”

While the industry is in “stage eight” of its Covid recovery, Kirby said it is still struggling with issues left over from the pandemic, such as pilot shortages and expensive fuel.

Airlines are now reaping the benefits of hybrid work, Kirby said, with the rise of remote work giving people more flexibility to travel.

United still maintains a positive outlook as revenue numbers continue to rise. Kirby said the company is “close to an all-time profit margin.”

“If I didn’t watch CNBC in the morning — which I do — the word recession wouldn’t be in my vocabulary,” Kirby said. “You just can’t see that in our data.”

Shipping is slow, Union Pacific Railroads CEO Lance Fritz told CNBC that it’s a sign that consumer spending is slowing and the economy is tightening.

“The housing market has obviously slowed down and parcel packaging has obviously slowed down and we’re seeing that in paper and parcel shipping,” he said.

Fritz left it to the Fed to decide whether slowing inflation is worth putting pressure on the consumer’s wallet and potentially triggering a 2023 recession. As interest rates continue to rise, he said, spending and demand will definitely decrease.

“The Fed is trying to hit us all in the firing line by slowing the economy and hurting demand. That’s not good,” Fritz said.