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Early consumer earnings make the wealth effect clear
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Early consumer earnings make the wealth effect clear
Oct 21, 2025 10:43 AM

(Reuters) -Prominent consumer-facing companies Coke, 3M ( MMM ), General Motors ( GM ) and Philip Morris ( PM ) all flagged consumer resilience in their earnings reports on Tuesday - depending on the consumer.

Case in point: industrial conglomerate 3M ( MMM ) raised its profit expectations for 2025, while also flagging weakness in the consumer and housing sectors that translated into soft demand for some of its goods like roofing granules, used for making shingles. 

Beverage giant Coca-Cola posted a jump in margins, while its executives also said lower-income consumers were still under pressure. 

The first round of U.S. corporate earnings has produced mostly solid results, particularly as companies had lowered expectations coming into the season. 

About 15% of S&P 500 companies have reported results thus far, and 87% have exceeded market estimates, according to LSEG data. 

With the U.S. economy increasingly dependent on a smaller slice of earners, consumption data prior to the U.S. government shutdown suggested those households were still spending, even as overall sentiment remains sour due to higher inflation.

"We see at the headline level a consumer that's overall resilient in terms of total spend. When you get underneath, you have two distinctive types ... at the higher end of the socioeconomic pole you've got more resilience, and at the lower end you've got a consumer base that's under more pressure," Coke CFO John Murphy told Reuters.

Spending by well-to-do consumers has bolstered overall consumption and, in tandem, equity markets. That creates something of a virtuous cycle for the wealthiest, as the rising market benefits more affluent households that have more money invested in stocks. 

"There's no doubt that the economy is being driven by two groups. The more affluent income earnings as opposed to the more moderate income earnings, and as long as that exists, the shelves can be liquidated," said Peter Cardillo, chief market economist at Spartan Capital Securities. 

"There's still buying power out there among the greater earners. That remains the key."

Germany's Adidas boosted its profit outlook as the price of its best-selling Samba sneakers previously priced at $90 and up now start at $100 on its U.S. website. 

The overall market was mixed on Tuesday, but the companies reporting earnings mostly rallied. General Motors ( GM ) shares gained 15% on Tuesday, 3M ( MMM ) rose about 6% and Coca-Cola added 3.3%. [.N]

3M ( MMM ) relied on its larger customers to drive sales, as shrinking discretionary incomes left its consumer business growing just 0.3% in the third quarter.

General Motors ( GM ) lifted its financial outlook for the year, lowering its expected financial hit from Trump's tariffs to a range of $3.5 billion to $4.5 billion, after Trump approved an order to expand credits for U.S. auto and engine production.

While the company issued a dour outlook for electric vehicle sales, CEO Mary Barra predicted strong 2026 sales, particularly for its traditional internal combustion engine trucks that drive Detroit's profits. 

U.S. car sales have remained strong despite uncertainty around tariffs, rising 6% in the third quarter. American car shoppers have continued to opt for pricier models and added features as the average cost of a new car exceeded $50,000 for the first time ever in September, according to KBB.

"There have been big question marks over consumer demand recently. Some measures have it declining, yet reports from bellwethers like Coca-Cola, Philip Morris ( PM ) and GM would seem to counter this. It probably depends on where companies are on the value chain to some extent," said David Morrison, senior market analyst at Trade Nation. 

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