On a yr/yr basis, my business sales models have improved in recent months from the
low 2-3% range seen around the turn of the year up to the 4-5% through March. The
growth is a little uneven but is volume driven. Pricing power remains muted and my
price / cost model has slipped, particularly for the more basic materials and
manufacturing companies. The recent slippage in business hiring may help some
companies offset reduced pricing power.
From a macro perspective, profits were again subdued in the recent quarter although
the trend month-to -month improved significantly so that March may have bailed out
more than a few performance comparisons for businesses. My expectation for full year
profits is for moderate progress based on an eventual move up in top line growth to 6%
or a little better. To get there, we may need to see a stronger inflation and pricing power.
Revision of production series data by the Fed shows there is a little more slack in the
system than was indicated last year. The new Fed data also show a little faster growth
of productive capacity. This suggests that if the economy does regain more growth
momentum, the eventual development of cost inefficiences will be milder.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!