Blokland’s daily sketch

Blokland’s daily sketch

12-04-2021 | Daily sketch
Higher producer prices not just about inflation
  • Jeroen Blokland
    Portfolio Manager
US producer prices are rising at the fastest pace in almost ten years. And while this undoubtedly means inflationary forces are building, higher producer prices also signal higher company earnings. As today’s chart reveals, changes in producer prices correlate positively with changes in (forward) earnings per share. Higher producer prices signal a pick-up in economic activity and declining overcapacity. With wage growth expected to be relatively muted in the coming quarters as unemployment is still high, company profitability looks strong. We should take into account, however, that current PE ratios demand high earnings growth to be justified.
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As a senior portfolio manager I use charts to illustrate financial issues every day. I tweet my favorites as @jsblokland and was named 'one of the 50 most important people for investors to follow in 2018' by MarketWatch.
Previous editions of the daily sketch can be found on my personal financial markets blog. All graphics provided are collected from Bloomberg data and public websites. They do not always reflect my personal opinion and may also not necessarily reflect the opinion of Robeco. Please cite all references or quote the original source if replicating content.

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