After seeing slowing client demand in its furniture-rental unit in the second quarter, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), now appears to be singing a different tune: it may now believe that firms are putting the brakes on spending thanks to less optimism for the U.S. economy.
Jeff Pederson, the new chief executive officer of Berkshire’s CORT Business Services Corp., said via Bloomberg that demand is “simmering compared to where it was at the beginning of the year, when it looked like the recovery, at least from our perspective, would have been pretty robust. It’s not flat-lining, by any stretch of the imagination, but it has slowed down.”
In additional comments from Pederson, he noted that uncertainty from Europe’s debt crisis and economic growth sources affected CORT’s second quarter spending. He said, “I’ve heard nothing from our business-to-business clients that would indicate that it’s a cash issue. It’s more cautionary. Where is the growth really going to be by year end?”
On a positive note, CORT businesses offering student housing, trade shows and events furnishings have risen.
Pederson said, “The commercial furniture rental business kind of a pretty good indicator of whether American business is involved in a lot of project growth. If they’re involved in a lot of project growth, it usually means that they’re a bit bullish on what the future holds.”
Does This Contradict Earlier Berkshire Remarks?
Interesting comments coming from the world’s biggest provider of rental furniture.
Rewind to February and Berkshire Hathaway’s billionaire CEO and Chairman Warren Buffet had been signing a different tune. In February via a shareholder letter, he emphasized CORT’s rebound as one example of a business independent of the housing market that had recovered since the end of the recession in 2009.
In May at the annual shareholder meeting, Pederson said, “Businesses are starting to use some of their capital.” He added that CORT had found success in its furniture rental business to college students. He added, “That part of our business has been very vibrant the last two years.”
Even Buffet was still bullish on that first Friday in May, saying to CNBC, “We’re still seeing an economy that’s improving, but it’s not at a fast rate.”
And in early June, Buffet was still taking an anti-recession stance. While economic reports painted a recovery losing some speed (see May employment report) the billionaire said that the odds of seeing a renewed recession was “very low.” However, he did say bets could be off if the effects from Europe’s financial crisis were to “spill over in a big way” reported the Associated Press.
So do these new remarks contradict Buffet and his lieutenants? Maybe not. Keep in mind that Berkshire Hathaway operates more than 70 units. CORT is just one piece of a very large pie and the different economic events will affect the giant’s businesses differently.