US Earnings Continue
Strong sales from Starbucks — global sales grew 10%, driven by a 5% increase in price-per-ticket and 5% organic demand growth. Slightly weaker sales in the US – 6% ticket price growth and only 1% organic growth. Sales in China grew 46%, which has been the main ‘problem’ area for the company — they’re now back on track. Starbucks’ loyalty card users in the US grew 15% to 31.4 million — in total pre-paid purchases of future Starbucks goods is $1.7bn — in other words, Starbucks has a bank-like balance sheet. Retain buy.
Weaker sales from Oxy – EPS of 0.68 per share vs. expectations of 0.73. Expected as the price of oil has dropped. Business as usual — we still like the stock (as does Buffett).Fitch downgraded the USA’s credit rating from AAA to AA+. In our view this is immaterial. The USD remains the world’s reserve currency.
The case for a higher Australian cash rateWe still there there is more work to be done in Australia — unemployment is still sitting at secular lows.

Meanwhile, services inflation remains elevated too:

Finally, mean inflation remains elevated at ~6.00% — we still think another hike is needed to push inflation down, especially as the national industrial minimum wage (1 in 5 workers) increased 5.75%, effective from July 1.
