Things that come to mind can't be helped. Today's third! 【Shun Nakahara's Today's Word】 Updated July 20

Economic downturn winds and light on the horizon

Stories of a recession are sprouting one after another.

Apple plans to slow hiring and spending in some divisions next year. According to sources, this plan is part of a strategy to manage the business more cautiously during periods of high uncertainty. However, this is not the company-wide policy. Not all teams will be affected, and Apple still plans to make aggressive product announcements next year, including a mixed-reality (MR) headset. Even so, for a tech giant like Apple, this could be the biggest shift since the pandemic. The problem is that these rounds of personnel and spending cuts are not limited to Apple alone. Alphabet, Amazon, Meta Platforms, and Snap, among other major tech firms, have also been cutting budgets or slowing hiring recently. For now, Apple’s headcount reduction is extremely conservative—“not replacing positions”—but for a company that typically hires 10–20% more staff each year, this is quite backward. At this point, some divisions are already expected to miss 2023 budget targets. Internally, there must be substantial pessimism in discussions. It’s unlikely to be the case that price increases in Japan, where global market share was as high as 20%, will not lead to a fall in sales.

Still, there are some bright spots. Netflix announced on the 19th that, for the April–June (Q2) period, net new subscribers fell by 0.97 million, but the decline was less than half of market expectations of 2.2–2.3 million. The new season of the company’s most popular English-language sci-fi series “Stranger Things” contributed significantly. The stock rose as much as 12% in after-hours trading. The most cautious long-term view will not vanish. The company expects only a 0.1 million net increase in subscribers for July–September (Q3), which is about half of the consensus of 1.8–2.0 million, suggesting the rebound will fall short of expectations. The road ahead remains thorny.

Mr. Gita Gopinath, Director of the IMF Strategy, Policy, and Review Department, said at a panel discussion held on Bali, Indonesia, that rising prices for food and energy, capital outflows from emerging markets, the persistence of the COVID-19 pandemic, and slowing Chinese growth have greatly increased policy makers’ difficulties. He stated that “the successive shocks are actually weighing on the global economy,” and that in the next report the IMF will substantially downgrade the growth outlook for this year. The IMF has already revised down its April forecast for global growth this year to 3.6% from 4.4% pre-war in Ukraine. Considering the U.S. essentially flat growth in Q1 and Q2, growth could drop to around 2%.

However, the abundance of bad news—if it continues—could be interpreted by the stock market as a sign of a bottom. Although fiscal stimulus and monetary easing have not yet reached their trigger points, such extensive price adjustments and widespread pessimism in the media suggest that a bottom could be forming and a rebound may be imminent.