The second quarter saw continued earnings growth for US companies, but there are signs that inflation and a slowing economy are starting to weigh on American consumers. Some company executives are highlighting the growing weakness of lower-income consumers, even as many companies say demand looks strong overall. That weakness is likely to spread if the economy continues to slow, and it suggests investors will need to have a more discerning eye for winners as consumers search for deals. translate and spend money to buy big tickets. A worrying sign about consumers arrived earlier this week from AT&T. CEO John Stankey told CNBC’s “Squawk Box” on Thursday that bills are being paid more slowly, especially to lower-income customers. “There’s clearly some momentum going on in the economy where we have customers who are loosening their payments a little bit,” Stankey said. “We expect that they will continue to pay their bills, but it will take them longer to do so. That’s not typical in an economic cycle and we’re starting to see that possible. the bottom end of the subscriber base makes some decisions as to whether I’ll pay the bill this month or that month due to some pressure they’re seeing at home.” One of the first areas that could pop up. Consumer recession is the auto market. AutoNation CEO Michael Manley says the car market is finally starting to weaken. “From a volume perspective, total used sales are down 4% and down 9% on a same-store basis. And all the volume reduction is due to our selection of imported vehicles, priced from 20,000 The pressure on consumer spending growth comes as inflation remains near four-decade highs, off the label, Manley said Thursday. “transient” signal and forced the Federal Reserve to raise interest rates aggressively. after pandemic-era stimulus helped boost household balance sheets in 2020 and 2021, even for many unemployed Americans, CEOs use that as a reason for optimism. However, with prices rising above wages, those savings won’t be able to support the same level of spending, said Robert Gorman, CEO of Atlantic Bankshares, on an earnings call. announced Thursday that the regional bank is seeing that excess deposit flow “particularly to customers with lower-than-equilibrium median incomes.” Discover’s chief financial officer, John Greene, said there was Evidence in credit card company data shows that high gas prices are changing consumer behavior, even as the labor market remains strong. One way that customer behavior changes during a recession is called substitution. Morgan Stanley researchers said in a note to clients on Friday that high-frequency spending data shows consumers are turning to cheaper brands and unbranded products to save money. against inflation. “Early signs of a reduction in commerce for high-frequency purchases such as tobacco, groceries and fast food suggest that consumers may be shifting spending patterns and focusing on prices. We think this is just the beginning. High inflation could encourage trade to fall further through 2022.” notes said. For investors, Morgan Stanley highlights a number of companies with strong pricing power. These include fast food brands Mondelez and Hostess Brands, as well as elf Beauty. On the other hand, the company says that food companies in the category with cheaper competitors may struggle. Morgan Stanley said Kraft Heinz and JM Smucker could be names to avoid. Similarly, BMO Capital Markets chief investment strategist Brian Belski said in a note to clients on Friday that “stock selection is critical” in the realm of consumer discretion. BMOs have better ratings for TJX Companies, which could benefit from consumers switching to cheaper apparel. – Michael Bloom of CNBC contributed to this report.