The group's US GDP forecast has fallen 'sharply' as a result, to 1.9% in 2022 and 1.3% in 2023, down from 5.7% in 2021, with inflation continuing to inflame input costs such as freight and labour costs.
In addition, consumer sentiment continues to deteriorate, with a 40% fall since the start of 2022.
Moody's made its outlook in the latest edition of its Behind The Bonds podcast series.
'Better Cost Flexibility'
Moody's noted that food, beverage and tobacco companies are better placed to weather the economic storm, having 'better cost flexibility' than their peers, which could give them an edge during an economic downturn. At the same time, demand strength is likely to be weaker for leisure, durables and mass market beauty, although prestige beauty should perform stronger.
'As the economic downturn deepens, consumers will think hard where they want to spend their limited disposable income,' Moody's said.
'Consumer goods companies in food, beverages, tobacco and personal care that meet consumers’ basic needs or have more inelastic demand will benefit from steady consumer purchases. Prestige beauty will also be resilient due to frequent use and high operating margins and pricing power.
'Prestige beauty and premium beverage will also benefit from the so-called lipstick effect, where consumers continue to make “feel good” purchases, as well as continued recovery in travel retail and outdoor activities. More discretionary consumer goods companies in leisure and durable goods will be most affected as consumers shift spending to services from goods.'
Other factors that are likely to influence consumer behaviour over the coming year include a change in the consumption mix as the pandemic wanes – with consumers shifting spending from services to goods – and the 'lipstick effect', where consumers tend to continue to buy small luxury items, even during downturns.
In addition, private label is likely to me 'more resilient' as consumers cut spending in the downturn, Moody's said.