Warren Buffett's Berkshire Hathaway Signals Consumer Cutback, Recession May Be Looming: 'Fair Conclusion,' Says Expert

Warren Buffett’s Berkshire Hathaway BRK BRK revealed significant declines in consumer-facing businesses, signaling a possible economic slump or recession, Business Insider reports.

Berkshire Hathaway published second-quarter earnings on Saturday, showing a 23% plunge in revenues from BNSF Railway, a 22% fall in real estate brokerage revenues and a 19% tumble in manufacturing consumer products.

The declines were attributed to higher interest rates, inflation, and other macroeconomic conditions.

Despite overall operating earnings growing by 7% to $10 billion, the slowdown in consumer businesses may indicate a broader downturn in the US economy.

“That is a fair conclusion,” said James Shanahan, a senior equity research analyst at Edward Jones. He further mentioned that the decline in demand for various goods wasn’t solely attributed to increased interest rates. The reduction in lending by banks also played a role, creating difficulties for consumers to secure credit during that time.

American households have faced rising prices and surging interest rates over the last 18 months, leading to increased debt and reduced savings. The Federal Reserve’s response to 9.1% inflation last summer has made borrowing more expensive, potentially eroding consumer spending.

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