Business

U.S. Inflation Falling Quicker Than Expected

Published

2 years ago

December 14, 2022

A cooler-than-expected CPI report has sparked a rally in stocks across the board.
Energy costs and used cars were the biggest drivers of the cooling.
Real wages for Americans have slid further.

inflation

The first of this week’s big event risks has finall arrived, and while the world and his pet rabbit is focused on the number’s potential for ‘dovishness’, bear in mind that expectations are for a 0.3% MoM rise and 7.3% YoY rise (which while ‘slowing’ remains extremely high by any standards). The banks’s CPI forecasts were all in sync:

7.2% – Barclays
7.2% – Credit Suisse
7.2% – Goldman Sachs
7.2% – Bloomberg Econ
7.2% – Citigroup
7.2% – Morgan Stanley
7.2% – Wells Fargo
7.3% – HSBC
7.3% – JP Morgan Chase
7.3% – UBS
7.3% – Bank of America
7.4% – SocGen

… which is precisely why the headline CPI printed cooler than all of the major expected, rising just 0.1% MoM, with the YoY rise falling to +7.1%, which was the lowest since Dec 2021…

… and the biggest monthly drop (-0.63ppt) in the YOY print (from 7.7% to 7.1%) since 2020…

Core CPI was expected to rise 0.3% MoM also (+6.1% YoY), and like the headline it came in cooler than expected at +0.2% MoM and +6.0% YoY…

Under the hood, energy costs and used cars were the biggest drivers of the cooling…

Services inflation YoY rose modestly as Goods inflation YoY dropped again…

Energy and Goods actually fell in price MoM…

More details from the report, first on food and energy…

The food index increased 0.5 percent in November following a 0.6-percent increase in October.
- The food at home index also rose 0.5 percent in November. Four of the six major grocery store food group indexes increased over the month.
- The food away from home index rose 0.5 percent in November, after increasing 0.9 percent in each of the previous 3 months. The index for limited service meals increased 0.6 percent over the month and the index for full service meals increased 0.4 percent.
The energy index fell 1.6 percent in November after rising 1.8 percent in October. The gasoline index declined 2.0 percent over the month, following a 4.0-percent increase in October.
- The index for natural gas continued to decline over the month, falling 3.5 percent after decreasing 4.6 percent in October. The electricity index decreased 0.2 percent in November.

… and then everything else, starting with the shelter index which was the dominant factor in the monthly increase in the index for all items less food and energy:

The index for all items less food and energy rose 0.2 percent in November, its smallest increase since August 2021.
- The shelter index continued to increase, rising 0.6 percent over the month.
  - The rent index rose 0.8 percent over the month, and the owners’ equivalent rent index rose 0.7 percent.
  - The index for lodging away from home decreased 0.7 percent in November, after rising 4.9 percent in October.

Other components were a mix of increases and declines. Among the indexes that rose in November were:

The index for communication which increased 1.0 percent over the month after decreasing 0.1 percent in October.
The index for recreation rose 0.5 percent in November, following a 0.7-percent increase in the previous month.
The motor vehicle insurance index increased 0.9 percent in November, the personal care index rose 0.7 percent
The education index rose 0.3 percent over the month.

And on the other side:

The medical care index fell 0.5 percent in November, as it did in October.
The index for hospital and related services decreased 0.3 percent over the month, and the index for prescription drugs declined 0.2 percent.
The index for physicians’ services was unchanged in November.

Other indexes which declined over the month include:

The index for used cars and trucks fell 2.9 percent in November, the fifth consecutive decline in that index.
The index for airline fares fell 3.0 percent over the month, following a 1.1-percent decrease in October.
The index for household furnishings and operations was unchanged in November, as was the index for new vehicles.

Of the above, it is interesting that apparel prices increased in November. As a reminder, Goldman noted that with the inventory-to-sales ratio for apparel stores is now above its December 2019 level, the more normal availability of apparel items this year is consistent with increased promotional activity, and online price data from Adobe shows a 15.5% decline in apparel prices over the course of November on a not-seasonally-adjusted basis. Expect a sharp drop in apparel prices next month.

Perhaps most notably, if we exclude shelter – on a sequential basis – we now have deflation, which of course we can’t do especially since both shelter and rent inflation are still rising at a rapid pace of 7.12% and 7.91% respectively, but about to roll over hard.

The punchline: if one excludes food (+0.5% M/M) and shelter (+0.7% M/M), it’s hard to find any inflation (and in fact, we may well have disinflation):

Food +0.5% M/M, vs 0.6% prior
Shelter +0.7%, vs 0.6% prior

but…

Used Cars -2.9% vs -2.4% prior
New cars 0.0%, vs +0.4% prior
Energy -1.6% vs +1.8% prior
Gasoline -2.0%
Fuel oil +1.7%, vs +19.8% prior
Apparel 0.2% vs -0.7% prior
Medical care 0.2% vs 0.0% prior

And given the violent rollover in M2, we suspect inflation will continue sliding…

Bear in mind that last month’s (11/10/22) YoY headline CPI print came in soft @ 7.7% (vs 7.8% expected and 8.2% prior), and with traders short into the event, the S&P exploded +554bps (sharpest rally since April of 2020).

Additionally, the S&P’s realized volatility into today’s CPI print is the highest since 2009…

Ahead of today’s print, both JPM and Goldman presented their market move forecasts, and indicatively a 7.1% print means the following for the S&P:

JPMorgan: S&P gains +2%-3%
Goldman: S&P gains +4%-5%

Finally, we note that real wages for Americans fell for the 20th straight month…

Source: Bloomberg

But hey, gas prices are down since the June peak, and ‘strong as hell’ economy, right?

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Business

Job Seekers’ Trinity Focus, Anger and Evidence

Published

43 minutes ago

November 18, 2024

Nick Kossovan

Though I have no empirical evidence to support my claim, I believe job search success can be achieved faster by using what I call “The Job Seekers’ Trinity” as your framework, the trinity being:

The power of focus
Managing your anger
Presenting evidence

Each component plays a critical role in sustaining motivation and strategically positioning yourself for job search success. Harnessing your focus, managing your anger, and presenting compelling evidence (read: quantitative numbers of achieved results) will transform your job search from a daunting endeavour into a structured, persuasive job search campaign that employers will notice.

The Power of Focus

Your job search success is mainly determined by what you’re focused on, namely:

What you focus on.

Your life is controlled by what you focus on; thus, focusing on the positives shapes your mindset for positive outcomes. Yes, layoffs, which the media loves to report to keep us addicted to the news, are a daily occurrence, but so is hiring. Don’t let all the doom and gloom talk overshadow this fact. Focus on where you want to go, not on what others and the media want you to fear.

Bonus of not focusing on negatives: You’ll be happier.

Focus on how you can provide measurable value to employers.

If you’re struggling with your job search, the likely reason is that you’re not showing, along with providing evidence, employers how you can add tangible value to an employer’s bottom line. Business is a numbers game, yet few job seekers speak about their numbers. If you don’t focus on and talk about your numbers, how do you expect employers to see the value in hiring you?

Managing Your Anger

Displaying anger in public is never a good look. Professionals are expected to control their emotions, so public displays of anger are viewed as unprofessional.

LinkedIn has become a platform heavily populated with job seekers posting angry rants—fueled mainly by a sense of entitlement—bashing and criticizing employers, recruiters, and the government, proving many job seekers think the public display of their anger won’t negatively affect their job search.

When you’re unemployed, it’s natural to be angry when your family, friends, and neighbours are employed. “Why me?” is a constant question in your head. Additionally, job searching is fraught with frustrations, such as not getting responses to your applications and being ghosted after interviews.

The key is acknowledging your anger and not letting it dictate your actions, such as adding to the angry rants on LinkedIn and other social media platforms, which employers will see.

Undoubtedly, rejection, which is inevitable when job hunting, causes the most anger. What works for me is to reframe rejections, be it through being ghosted, email, a call or text, as “Every ‘No’ brings me one step closer to a ‘Yes.'”

Additionally, I’ve significantly reduced triggering my anger by eliminating any sense of entitlement and keeping my expectations in check. Neither you nor I are owed anything, including a job, respect, empathy, understanding, agreement, or even love. A sense of entitlement and anger are intrinsically linked. The more rights you perceive you have, the more anger you need to defend them. Losing any sense of entitlement you may have will make you less angry, which has no place in a job search.

Presenting Evidence

As I stated earlier, business is a numbers game. Since all business decisions, including hiring, are based on numbers, presenting evidence in the form of quantitative numbers is crucial.

Which candidate would you contact to set up an interview if you were hiring a social media manager:

“Managed Fabian Publishing’s social media accounts, posting content daily.”
“Designed and executed Fabian Publishing’s global social media strategy across 8.7 million LinkedIn, X/Twitter, Instagram and Facebook followers. Through consistent engagement with customers, followers, and influencers, increased social media lead generation by 46% year-over-year, generating in 2023 $7.6 million in revenue.”

Numerical evidence, not generic statements or opinions, is how you prove your value to employers. Stating you’re a “team player” or “results-driven,” as opposed to “I’m part of an inside sales team that generated in 2023 $8.5 million in sales,” or “In 2023 I managed three company-wide software implementations, all of which came under budget,” is meaningless to an employer.

Despite all the job search advice offered, I still see resumes and LinkedIn profiles listing generic responsibilities rather than accomplishments backed by numbers. A statement such as “managed a team” doesn’t convey your management responsibilities or your team’s achievements under your leadership. “Led a team of five to increase sales by 20%, from $3.7 million to $4.44 million, within six months” shows the value of your management skills.

Throughout your job search, constantly think of all the numbers you can provide—revenue generated, number of new clients, cost savings, reduced workload, waste reduction—as evidence to employers why you’d be a great value-add to their business.

The Job Seekers’ Trinity—focusing on the positive, managing your anger and providing evidence—is a framework that’ll increase the effectiveness of your job search activities and make you stand out in today’s hyper-competitive job market, thus expediting your job search to a successful conclusion.

_____________________________________________________________________

Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.

Business

Japan’s SoftBank returns to profit after gains at Vision Fund and other investments

Published

6 days ago

November 12, 2024

Anne Joseph

TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.

Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.

Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).

SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.

The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.

WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.

SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.

SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.

SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.

The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.

___

Yuri Kageyama is on X:

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Business

Trump campaign promises unlikely to harm entrepreneurship: Shopify CFO

Published

6 days ago

November 12, 2024

Anne Joseph

Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.

“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.

“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”

Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.

On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.

If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.

These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.

If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.

However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.

He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.

“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.

Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.

The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.

Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.

Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.

Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.

Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.

Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”

In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.

“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:SHOP)

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