The latest readings on business sales show that the plunge in oil prices and the soaring dollar are weighing on revenues growth:
(1) Business sales with & without petroleum. Business sales are down 2.5% y/y through June. Over this period, manufacturing shipments and distributors’ sales of petroleum products are down 25.8%. Excluding these products, business sales are up, but only by 1.3%. Last June, these non-petroleum sales were up 3.3%. This weakness is probably attributable mostly to the strong dollar’s depressing impact on exports. (Remember, this measure doesn’t include sales of goods and services produced and sold abroad by foreign subsidiaries.)
(2) Exports. Merchandise exports accounts for 26% of manufacturing shipments. The growth rate of the former is highly correlated with the growth rate of non-petroleum manufacturing shipments. Exports fell 6.3% y/y during June. A year ago, exports were up 2.5% y/y.
(3) The dollar. In addition to depressing US exports, the strong greenback directly reduces the dollar value of revenues and earnings from overseas operations. There is a strong inverse correlation between the trade-weighted dollar (TWD) and the growth rate in S&P 500 revenues. That’s because roughly 50% of S&P 500 revenues comes from abroad. The TWD is up 16% y/y. This implies that over the past year, the dollar has reduced S&P 500 revenues by 8.5%.
(4) Oil price. The price of a barrel of Brent crude oil is down about 52% y/y. The S&P 500 Energy sector accounted for about 10% of S&P 500 revenues a year ago. So it has knocked 5% off of revenues over the past year.
(5) Combined effect. The bottom line is that together lower oil prices and the stronger dollar have knocked almost 15% off of revenues compared to a year ago. On Friday, S&P reported that revenues were actually down only 3.7% y/y for the S&P 500. There has continued to be good revenues growth in some of the major sectors of the S&P 500. In fact, excluding Energy, revenues rose 1.7%. The revenues performance derby for the 10 S&P 500 sectors is as follows: Health Care (8.3% y/y), Information Technology (4.1), Financials (4.0), Telecommunication Services (2.4), Consumer Discretionary (1.6), Consumer Staples (1.0), Industrials (-3.8), Utilities (-4.8), Materials (-9.9), and Energy (-31.7).
Today's Morning Briefing: Gilded Ages. (1) Back to the future in Newport, RI. (2) Gatsby didn’t sleep here. (3) The “cottages.” (4) Robber Barons, the 1%, and the rest of us. (5) Might inequality be a byproduct of prosperity? (6) Entrepreneurial vs. crony capitalism. (7) Upward revisions in retail sales bullish for Q2 & Q3 GDP. (8) More records for standard of living. (9) Oil and dollar weighing on revenues, but analysts say worst is over. (10) Revenue winners and losers among the S&P 500 sectors. (11) Revisions show NIPA profit margin peaked during Q1-2012. (12) Business sales & GDP and vice versa. (13) Focus on market-weight-rated S&P 500 Retail industry. (More for subscribers.)
(1) Business sales with & without petroleum. Business sales are down 2.5% y/y through June. Over this period, manufacturing shipments and distributors’ sales of petroleum products are down 25.8%. Excluding these products, business sales are up, but only by 1.3%. Last June, these non-petroleum sales were up 3.3%. This weakness is probably attributable mostly to the strong dollar’s depressing impact on exports. (Remember, this measure doesn’t include sales of goods and services produced and sold abroad by foreign subsidiaries.)
(2) Exports. Merchandise exports accounts for 26% of manufacturing shipments. The growth rate of the former is highly correlated with the growth rate of non-petroleum manufacturing shipments. Exports fell 6.3% y/y during June. A year ago, exports were up 2.5% y/y.
(3) The dollar. In addition to depressing US exports, the strong greenback directly reduces the dollar value of revenues and earnings from overseas operations. There is a strong inverse correlation between the trade-weighted dollar (TWD) and the growth rate in S&P 500 revenues. That’s because roughly 50% of S&P 500 revenues comes from abroad. The TWD is up 16% y/y. This implies that over the past year, the dollar has reduced S&P 500 revenues by 8.5%.
(4) Oil price. The price of a barrel of Brent crude oil is down about 52% y/y. The S&P 500 Energy sector accounted for about 10% of S&P 500 revenues a year ago. So it has knocked 5% off of revenues over the past year.
(5) Combined effect. The bottom line is that together lower oil prices and the stronger dollar have knocked almost 15% off of revenues compared to a year ago. On Friday, S&P reported that revenues were actually down only 3.7% y/y for the S&P 500. There has continued to be good revenues growth in some of the major sectors of the S&P 500. In fact, excluding Energy, revenues rose 1.7%. The revenues performance derby for the 10 S&P 500 sectors is as follows: Health Care (8.3% y/y), Information Technology (4.1), Financials (4.0), Telecommunication Services (2.4), Consumer Discretionary (1.6), Consumer Staples (1.0), Industrials (-3.8), Utilities (-4.8), Materials (-9.9), and Energy (-31.7).
Today's Morning Briefing: Gilded Ages. (1) Back to the future in Newport, RI. (2) Gatsby didn’t sleep here. (3) The “cottages.” (4) Robber Barons, the 1%, and the rest of us. (5) Might inequality be a byproduct of prosperity? (6) Entrepreneurial vs. crony capitalism. (7) Upward revisions in retail sales bullish for Q2 & Q3 GDP. (8) More records for standard of living. (9) Oil and dollar weighing on revenues, but analysts say worst is over. (10) Revenue winners and losers among the S&P 500 sectors. (11) Revisions show NIPA profit margin peaked during Q1-2012. (12) Business sales & GDP and vice versa. (13) Focus on market-weight-rated S&P 500 Retail industry. (More for subscribers.)
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