Corporate America Panics As 'Student Loan' Chatter Hits Record On Earnings Calls
https://www.zerohedge.com/markets/corporate-america-panics-student-loan-chatter-hits-record-earnings-callsCorporate America is panicking this earnings season as the prospect of more than 40 million Americans carrying student debt will have to start making payments in October after a three-year-long payment forbearance that had artificially boosted disposable incomes by tens of billions of dollars.
Using the 'Document Search' function on Bloomberg, the phrase "student loan" in all second-quarter earnings calls soared to a record high of 151 mentions.
During earnings calls, companies in the financials, consumer discretionary, and consumer staples sectors had the most mentions. Consequently, these sectors are poised to face the greatest exposure when consumer spending decreases.
In June, Barclays economist Adirenne Yih wrote in a note to clients (available to pro subscribers in the usual place), explaining the restart of student loan payments would be a $15.8 billion monthly headwind -- or a $190 billion per year -- to the US economy as the average student debt holder sees an incremental monthly payment of -- $390 beginning this fall.
When people start paying student loan debt again, consumer spending could drop. Some companies are more expose than others.
Earnest shows companies in the top left quadrant are most exposed to the student loan-paying cohort.
Company execs have already warned investors what's about the incoming spending cliff:
Target's CFO Michael Fiddelke
"The upcoming resumption of student loan repayments will put additional pressure on the already strained budgets of tens of millions of households ... We remain cautious in our planning."
Levi's CEO Chip Bergh
"It's not going to help us ... The consumer is already under pressure and this is just going to ratchet that up even further."
Macy's CFO Adrian Mitchell
"The expiration of student loan forgiveness beginning in October, higher interest rate levels, and lower new job creation are all new pressures on the consumer."
A looming consumer spending cliff has corporate America in a panic. This seems deflationary.
