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Global economic slowdown weakens economic recovery in the US: Indra Nooyi

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February 29
5:47 AM 2016

PepsiCo's chief executive officer and chairman, Indra Nooyi, says that the global economic slowdown poses a serious peril to the US economy. The company recently reported a 14% and 5% drop in its fourth-quarter earnings per share and revenues respectively.

According to her, the global recession along with geopolitics nature of the US have put the nation's economy in a miserable condition. If this situation persists, it may result in serious economic turmoil. These economic pressures are adding more miseries to countries like Brazil, Canada and Russia. The economies of these nations will take a long period to recover as the measures undertaken by their central banks are "fully exploited over the past several years", as reported by The Motley Fool.

Indra Nooyi stresses on three risk factors that may weaken the subtle recovery of the US economy. These risk factors include social and political upheaval, instability in the financial market and the robust US dollar. The global economic disorder has created a robust dollar, which can impact the conversion and transaction issues of US firms that depend on their foreign markets. The data released by S&P Dow Jones Indices shows that global markets contribute nearly 48% to revenues of S&P 500 firms.

The uncertainty in financial markets may affect consumer expenditure and also enterprise investment. The Dow is currently down about 4% in the US, these market sell-offs can impact the economy of the US, which has robust economic foundations. The market uncertainty depends highly on psychological aspects more than mechanical factors like wages, salaries and interest rates, according to George Ip.

Finally, Nooyi points to the social and political hurdles prevailing across the world that could result in serious economic turmoil. The fear of Brexit and other political turmoil worldwide have created an uncertainty in the overall market.  

According to Financial Market News, Orrstown Financial Services reduced its holdings in PepsiCo by nearly 19% in the fourth quarter. While Atalanta Sosnoff Capital brought fresh stakes in the company worth at about $35.14 million and Renaissance Investment Group boosted its holdings in the company by 1.4%. Zacks Investment Research reduced the company's share rating to sell from hold on December 18th while Nomura promoted PepsiCo to a "neutral" from a "reduce" rating and lifted its objective stock price to $100 from $83 on November 23rd.

Meanwhile, Warren Buffet has said that the US economy is well positioned and that election candidates are misleading the people regarding the nation's economy. He said that the future generation is fortunate to live in a country whose economic fundamentals are strong, as reported by NBC NEWS.

The collapse in oil market combined with political hurdles has put the US economy under pressure, according to Indra Nooyi. However, economists believe that a rebound in the global oil market will put an end to all financial crisis.

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