Inflation, the Consumer and Asia manufacturing…

Michael Rudd, CFA | President, CEO & Portfolio Manager

This week, we noticed that the Canadian Consumer Price Index came in lower than last month. Other parts of the world have also reported moderating inflation (Germany this week, for example, had much lower purchaser price data). We highlight North American inflation data in Figure 1. It appears that inflation in both Canada and the US, after a slight uptick, has moderated. Investors will be watching how this data evolves closely. We have also presented comments from management from two companies we own in the equity portfolios below (JPM and V), which demonstrate the consumer is doing well.

  • “We’re in pretty good shape and so far it looks like that soft-landing type of scenario. But put me on the cautious side of that one” – JPMorgan Chase (JPM ) CEO Jamie Dimon
  • “We continue to see relative stability across the underlying drivers of our business… When you look at our segments between high and low spend categories, those trends have been relatively unchanged now for several quarters. And so the consumer continues to be resilient” – Visa (V) CFO Chris Suh

We also present the manufacturing component of survey data from Asia in Figure 2. Most countries are now in expansion territory (i.e. over 50), which indicates that manufacturing confidence in Asia is improving.

“This means that” this is a good development. Decreasing inflation, a strong North American consumer, and increasing manufacturing confidence in Asia is a great set up for the global economy. We continue to see limited risk of recession. As we mentioned in the last note, this is one of the few times in my career where there is actual diversification between major economic zones (i.e. North America, China and Europe). We see significant opportunities to position our portfolios opportunistically.

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