Inflation signals have been heating up with consumer price inflation blowing past expectations and wages rising as labor demand rapidly outpaces supply. Another important metric of rising inflation pressures, the Producer Price Index, shows input costs are surging beyond just a few select industries. PPI data show that prices received by producers of goods and services rose 0.8% m/m and 6.6% y/y in May, with nearly 60% of this increase attributed to a 1.5% rise in the prices for goods. Looking further up the supply chain, commodity prices, a traditional harbinger of inflation, have also been soaring. Commodity prices early in the production cycle, as measured by the PPI component unprocessed goods for intermediate demand, rose 8.4% m/m and 57.9% y/y in May, the largest rise since 1973. As demand for goods remains exceptionally strong, it is more likely that these higher input prices will be passed down the supply chain and ultimately result in higher consumer price inflation. While the Fed continues to believe that recent inflation will be transitory, surging upstream input prices still suggest additional inflation pressures ahead. It is also important to recognize that commodities are global, and as vaccinations accelerate in Europe and East Asia, commodity inflation could remain strong through the end of the year, providing additional fuel to recently higher inflation and putting further pressure on the Federal Reserve to accelerate its normalization of monetary policy.
J. P. Morgan
Happy Monday. Good Luck out there this week.
Global Spotlight
Regional elections in France. French voters will vote in a first round of regional elections on June 20, the last election before the country’s April 2022 presidential election.
Iranian presidential election results. Initial results from Iran’s June 18 presidential election are expected to be announced by June 21 after a manual vote count. Guardian Council eliminations prior to the polls significantly limited the available candidates and set the stage for a likely win for Ebrahim Raisi, a conservative cleric and head of Iran’s judiciary.
Germany hosts the Berlin II conference on the Libyan peace process. The United Nations hopes to secure more commitments at the June 23 conference for foreign fighters to leave Libya and to build momentum toward an election planned for December.
Ethiopia holds long-delayed elections. Ethiopia will finally hold parliamentary elections on June 21, the first since Prime Minister Abiy Ahmed came to office in 2018 with the promise of making democratic reforms and liberalizing the country’s economy.
Armenia’s parliamentary elections. Armenians will vote June 20 to determine their next prime minister. Incumbent Nikol Pashinyan is favored to win a narrow victory over Robert Kocharyan, the country’s former president from 1998 until 2008.
The U.S. North Korea envoy visits South Korea. From June 19-23, the Biden administration’s new representative on North Korea issues, Sung Kim, will travel to South Korea to discuss the outcomes of the recently completed U.S. policy review on North Korea. While there, he will join a trilateral meeting with South Korean and Japanese counterparts.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q1 earnings are expected to increase 52.8% from 20Q1. Excluding the energy sector, the earnings growth estimate is 53.5%.
- Of the 498 companies in the S&P 500 that have reported earnings to date for 21Q1, 87.3% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 76%.
- 21Q1 revenue is expected to increase 13.6% from 20Q1. Excluding the energy sector, the growth estimate is 14.4%.
- During the week of June 21, seven S&P 500 companies are expected to report quarterly earnings.
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