Corporate Growth: Could It Be Back?

Summer may be winding down, but consumer spending could be starting to heat up—and if it does, so will many companies’ hopes of finally growing their revenues.

Inflation in July came in at its lowest level in three years. The Fed this week signaled that an interest rate cut is coming in September, the first since the early days of the pandemic. And recent earnings from some major retailers were more encouraging than expected. Korn Ferry’s North America president, Radhika Papandreou, says leaders are hoping that the trifecta of data is enough to get consumers spending again. “The question now is whether these moves will normalize things, or whether more action will be needed to stimulate the economy,” she says.

Based on GDP figures, companies have been struggling with growing their revenues organically ever since the burst of buying activity in the early post-pandemic period of 2021. The situation in 2024 worsened during early summer, when consumers, spooked by inflation, pulled back even more on spending. But declining prices for most categories outside of food have gotten people shopping again. July retail sales posted their largest monthly increase since January 2023, for example. Christian Hasenoehrl, global account lead in the Consumer and Industrial practices at Korn Ferry, says retailers have shifted their focus—from passing inflation costs on to consumers to getting suppliers to bring down what they charge. While the economic picture may have hurt back-to-school shopping, Hasenoehrl says optimism is growing that it will improve by the holiday retail season. “The hope is that cheaper prices and more affordable debt will bring the consumer back,” he says.

After cutting costs for the last 18 months, Hasenoehrl says, companies want to position themselves for when the consumer comes back. He expects leaders to start ramping up capital expenditures towards the end of the year and into 2025, particularly if interest rates are cut by half a point (rather than a quarter of a point) in September. “Companies will start to refocus on growth,” he says. Investments in innovation and operations that were halted or slowed—like factory and warehouse upgrades and new product development—could start picking up again.

Papandreou agrees, adding that deal activity could see a spike as the year winds down. The data on mergers and acquisitions in the first half of this year has been mixed, with the dollar value up but the number of deals down. Most of the deals, however, were paid for with cash or private credit, meaning the buyers didn’t have to borrow debt at high interest rates. Papandreou expects lower interest rates to bring private equity and other buyers in from the sidelines. “There’s a lot of dry powder waiting to be put to work,” she says.

But experts caution leaders must be careful not to move too aggressively. For one thing, interest rates usually decline faster than they rise, so you don’t want to refinance or borrow too much too soon. The timing of when, and to what degree, consumer spending will rebound is also a major question mark. “Firms need to think hard about that,” says Papandreou. To be sure, while some retailers and consumer goods companies reported strong quarterly results, others came in mixed or weak, leaving investors to wonder if the environment is changing or if some companies are just outperforming others.

Hasenoehrl says that hiring is one area in which companies are likely to remain cautious, amid so much uncertainty. Consumers and growth need to come back before hiring will. Or, as Hasenoehrl says, hiring won’t start increasing until “later in the cycle.”

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