US Inflation: CPI and PPI
US CPI (inflation) report yesterday – headline CPI rose by just 0.1% month on month, slightly less than expected, taking the annual increase down to 5.0%, its lowest rate in nearly two years. The Core CPI which excludes food and energy rose by 0.4% month on month, as expected, seeing the annual increase tick up slightly to 5.6% – the core figure remaining between 5% to 6% over the last year, and is remaining sticky and will be the most difficult to bring down.
Within the mix there were hints of slowing services sector inflation, with housing cost measures running at the slowest pace in about a year. Inflation likely remains too sticky for comfort and the Fed wants to see a string of better inflation data before declaring victory. This keeps the door open for one more rate hike in the Fed’s May meeting.
US Core CPI (Inflation)
An interesting thing to note is year on year inflation is slowing down from its peak, however than is an increase from a higher base. When looking at a 24-month increase (orange column), it is an alarming increase of 12-14% increase over the last year, be interesting to see when this number falls down to 6% (which implies a 3% annual increase), but shows price index is still elevated and would be difficult to control.
Following on from a soft CPI print, at least at the headline level, US PPI (Producers inflation) data came in weaker than expected as well, the headline figure dropping -0.5% month on month – expectations for this to remain flat, the largest fall since the early stages of the COVID pandemic, taking the annual increase down to a more than 2-year low of +2.7%. The ex-food and energy figure fell -0.1% month on month and rose +3.4% annually. The data showed some clear slowing in the trend for services sector inflation, portending weaker core CPI inflation ahead.
Stock in Focus: LVMH
LVMH reported strong revenue for Q1 — organic revenue grew 17% to 21B EUR — we think this is remarkable given the tightening economic backdrop — in the super-premium sector the affluent keep spending. Japan was the strongest growing sector — growing +34%, while China contributed to revenue by about +14% — what we’re seeing is consumer balances in the China being spent, as they weren’t during China’s prolonged lockdowns. We’re buy rated on LVMH — so far luxury is immune to the wider economy. Retailing grew +30% — that’s a direct effect of China’s reopening, while fashion sales grew +18% as Louis Vuitton, Dior and Celine remain “hot ticket items”. The chart below is a thing of beauty to us — that’s 17% organic revenue on the solely from demand – no financial engineering or currency-associated gains/losses to speak up. Sometimes people ask us: “What’s the value in handbags?” — there’s your value.
New Zealand
The New Zealand market (NZX50, +0.1%) edged up as the absorbed a weaker than expected inflation print in the US, while company specific news flow was non-existent for the day.
Australia
The Australian market (ASX200, -0.3%) was weaker as concerns of the RBA performing one more rate hike was elevated following the jobless rate remained flat at 3.5%, the Australian economy creating 53,000 jobs, versus expectations of a 20,000 new positions.
Corporate Travel was the strong performer of the day rising +12.1% after announcing it won a $3 billion contract with the UK’s Home Office for two years.
US
The S&P 500 was up +1.33% on a strong day of trade — of note to our readers is Josh Harris (of Apollo) bidding $6B for the Washington Commanders — it’s adding another piece to the puzzle of the whole Manchester United bidding war — it justifies a high multiple + high price paid for the UK football team.