Supply Shortages Hit Amazon and Apple... Will the US Economy Rebound in Q4?

Amazon, Apple, Starbucks, etc.
Major Companies' Earnings Below Expectations

[Asia Economy New York=Correspondents Baek Jong-min, Jo Yoo-jin, Kwon Jae-hee] In the third quarter, the US economy slowed down due to the Delta variant virus and supply chain bottlenecks, and major companies such as Amazon and Apple also reported results below expectations. Although there are forecasts that the US economy could rebound in the fourth quarter as consumption picks up, the situation is not entirely optimistic.

On the 28th (local time), according to US economic media CNBC and various companies' IR materials, the world's largest e-commerce company Amazon's third-quarter net profit was $3.2 billion, down by half compared to $6.3 billion in the same period last year.

Revenue recorded $110.8 billion, a 15% increase from $96.1 billion in the same period last year, marking four consecutive quarters of revenue exceeding $100 billion, but it fell short of the market estimate of $111.8 billion compiled by Bloomberg News. Amazon's quarterly revenue growth rate has slowed down this year, with 44% in the first quarter and 27% in the second quarter. Andy Jassy, Amazon's Chief Executive Officer (CEO), predicted that "due to labor shortages, increased labor costs, worsening global supply chains, and rising freight and transportation costs, additional costs of several billion dollars will occur in the fourth quarter."

Apple's third-quarter revenue also increased by 29% year-on-year to $83.36 billion but fell short of the market expectation of $85 billion. This is the first time in four years since May 2017 that Apple's revenue has missed market expectations. Tim Cook, Apple's CEO, cited the overall chip shortage in the industry and production disruptions caused by the resurgence of COVID-19 in Southeast Asian regions such as Malaysia as reasons for the revenue shortfall.

Starbucks also missed expectations in the third quarter as sales declined due to the resurgence of COVID-19 in China, its largest market after the US. Starbucks' third-quarter revenue was $8.147 billion, a 31.3% increase from the same period last year, but it fell short of the market forecast of $8.21 billion.

The earnings announcements came as the US third-quarter Gross Domestic Product (GDP) recorded an annualized 2.0%, below experts' expectations of 2.8%, raising concerns about the US economy. It was revealed that even the world's largest e-commerce company and leading information technology (IT) firms could not avoid the supply chain crisis.

The market generally expects growth to rebound in the fourth quarter, but the outlook is not entirely optimistic. Supply chain issues that are holding back the US economy remain unresolved, and inflation concerns have not been alleviated. In fact, Amazon forecasted fourth-quarter revenue to grow 4-12% year-on-year to $130-140 billion, which is below the market estimate of $142.1 billion (13.2%).

The Wall Street Journal (WSJ) expects growth to accelerate again as spending increases during the year-end holiday season and companies boost investments. Karl Tannenbaum, Chief Economist at Northern Trust, explained, "Although there were temporary obstacles due to the resurgence of COVID-19, the situation will improve in the fourth quarter."

Actual economic indicators are also showing signs of improvement. According to STR, a hospitality data analytics company, the US hotel occupancy rate was 65% for the week ending October 16, the highest level since mid-August. James Knightley, an ING economist, said, "As the spread of the Delta variant slows, flights, restaurant dining, and hotel stays have increased," and predicted that the fourth-quarter growth rate will be much better than the third quarter.

Professor Son Seong-won of Loyola Marymount University forecasted, "Consumer confidence has shown signs of improvement. Consumers have saved enough for spending. Growth in service sectors such as travel, leisure, and healthcare will continue."

This content was produced with the assistance of AI translation services.