Even chocolate not recession proof

ZURICH, Switzerland --Nestle SA, the world's largest food company, dropped in Zurich trading after analysts at UBS AG and Deutsche Bank AG cut their ratings on the stock, citing the prospect that slower U.S. economic growth will weigh on sales.

UBS's Alan Erskine lowered his recommendation to "neutral" from 'buy." Deutsche Bank cut the stock to "hold" from "buy." Nestle shares fell 15 Swiss francs, or 2.8 percent, to close at 5 22 francs.

"There is increasing evidence of a downturn in consumer spending" in the U.S., Erskine wrote in an e-mailed note Tuesday. "We would not be surprised if, in February, management flag some uncertainty around the U.S. consumer and the elasticity of demand in the emerging markets."

Consumer spending and incomes in the U.S. rose 0.2 percent in October, less than economists' forecast. UBS estimates Nestle gets 30 percent of its profit from the U.S., where the Vevey, Switzerland-based company sells Purina pet food, Poland Spring bottled water and Gerber baby food. In emerging markets, Erskine said Nestle may have trouble raising prices further.

"Even a company as large as Nestle would feel the pinch should the U.S. fall into a recession," said Patrick Hasenboehler, an analyst at Bank Sarasin in Zurich who rates the stock "buy."

Harvard University economist Martin Feldstein, head of the group responsible for dating U.S. economic cycles, said Dec. 14 there's about a 50 percent chance the U.S. may enter recession next year if consumers cut spending amid sliding home values.

Of 34 analyst ratings compiled by Bloomberg, 25 recommend investors "buy" Nestle shares, seven analysts rate the stock a "hold," and two say "sell."