Why Americans Aren’t Feeling Wage Gains The consumer-price index rose 0.2% in April, as average hourly pay in the private sector remained flat
Average hourly pay for private-sector workers, adjusted for inflation, was flat in April from a month earlier, the Labor Department said Thursday. Average weekly earnings, also taking into account inflation, fell 0.1% last month.
From a year earlier, real average hourly earnings for private-industry employees edged up just 0.2% in April. (…)
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HALF EMPTY, HALF FULL
Yesterday’s CPI report gave ammo to both inflation camps. This Cleveland Fed table is a good snapshot of these hopes/fears readings: core CPI is +2.0% a.r. in the last 3 months, down from +2.4% in the previous 3 months. The 16% trimmed-mean CPI is also down from +2.8% to +1.6%. But the Median CPI is stubborn at +2.8%.
I side with the worried camp, seeing the inflation pipeline pretty full (trucking, rail, oil, steel, aluminum, lumber, wages, etc.) when resources utilization is high (contrary to 2011) and businesses seem willing and capable of passing on price increases to their customers.
This chart is from BlackRock:
From Markit:
Survey evidence indicated that robust demand has allowed an increasing number of companies to raise prices for both goods and services in recent months. Higher oil prices are also pushing up costs. Measured across both manufacturing and services, input costs increased at the fastest rate since 2013, which will inevitably put greater pressure on consumer prices in coming months, all of which makes for a hawkish policy outlook.
The UIG measures currently estimate trend CPI inflation to be approximately in the 2.3% to 3.2% range (from 2.2%-3.0% in February), with the prices-only measure modestly below the actual twelve-month change in the CPI (+2.5%).
DoubleLine’s Jeff Gundlach illustrates the pull the UIG seems to have on the core CPI (now +2.1%).
Good thing earnings are currently so strong, winning the race against inflation, but for how long?
EARNINGS WATCH
We now have 455 companies in, essentially missing 27 Consumer related and 13 Technology companies. The beat rate holds at 78% with a surprise factor of +6.8% (+1.1% on revenues). Blended EPS are now seen up 26.0% (24.0% ex-Energy).
Pre-announcements for Q2 remain pretty good with 35 positive vs 34 and 38 at the same time during Q2’17 and Q1’18 respectively. Negative pre-ann total 44 vs 60 and 45 respectively.
Trailing EPS are now $140.14. Pro-forma the tax reform, assuming 7% average accretion, trailing earnings would be $146.50, rising to $151 if Q2 estimates (+19.7%, +16.4% ex-Energy) are met.
TECHNICALS WATCH
The S&P 500 established a new recovery high yestreday above its prior recovery high set April 18th. Lowry’s Selling Pressure continued to drop, falling to 116 and to another new low for the bull market.
DISNEYFLIX
When Disney went after Fox, I thought “what a content powerhouse!”. You can read about that (Disney and Fox and Kings of Content in the library). Derek Thompson explains the next step to create Disneyflix, and more.
This is a really good investment of 21 minutes of your time. Scott Galloway, Professor of Marketing, NYU Stern, chats with The Atlantic’s senior editor Derek Thompson about Disney, Netflix, and who will win the war for content and distribution. (H/T Barry Ritholtz)
Sell-off fears shadow China’s property tax push More than a fifth of investors say they may sell if Beijing imposes annual tax
Connecticut Passes Bill to Ease Federal Tax Burden The legislation sets up a potential standoff with the Internal Revenue Service
Connecticut has joined New York and New Jersey in passing legislation that aims to blunt the impact of losing some deductions under the federal tax overhaul.
The legislation proposed by Gov. Dannel Malloy, a Democrat, gives municipalities the authority to form charitable organizations to receive contributions from residents in exchange for property-tax credits.
The bill, which unanimously passed in the House and Senate earlier this week, is designed to help people who face higher federal tax bills after the new law put a $10,000 annual cap on state and local tax deductions. (…)
State officials estimate residents will lose $10 billion in deductions under the federal tax changes, which tend to benefit high-income earners the most. (…)