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Daily update

  • The profit-led inflation story has been fuelled by corporate results showing profit-led inflation. As these stories move from the financial press to social media, companies must weigh whether short-term margin expansion compensates for the risk of customer resentment at paying higher prices.
  • UK Bank of England Chief Economist Pill warned that companies must accept lower margins to avoid persistent inflation. Today’s CBI distributive trades survey gives a signal of consumer demand. However, accompanying comments may not reflect pricing reality. For companies, the first rule of price gouging is you do not talk about price gouging. The second rule of price gouging is you DO NOT talk about price gouging.
  • China’s government seems more nervous about growth. After encouraging regional governments to boost exports last month, a new cabinet plan to boost exports was unveiled yesterday. There are media reports that the People’s Bank of China is suggesting banks cut discount rates to encourage the spending of savings. That may not work if consumers are building precautionary savings as insurance against future uncertainty.
  • US March durable goods and inventories data interest economists, but rarely move markets. Banking concerns are back but contagion risk seems contained, making this a corporate not an economic focus.

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