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Wholesale Inventories Solid Amidst Recession Concerns

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Amid the carnage in the markets yesterday — a period which Zacks Executive Vice President Kevin Matras said was “pricing in a recession” — we saw some small but possibly important metrics on productivity and inflation. These are, after all, the two major sources for our investment pain for most of 2022 thus far.

Wholesale Inventories for March yesterday came in at +2.3%, in-line with expectations and down 20 basis points from the March read. With global supply chain difficulties leading to volatile inventories — much of which provided a negative shock to Q1 GDP numbers, at least on the first read — a stable, calmly receding Wholesale Inventories report is a mildly positive development. We’d like to see this continue.

April Inflation Expectations are, unsurprisingly, higher in the one-year print than they are in the three-year, both of which were also released yesterday. The one-year read of +6.3% is down from the +6.6% reported for March — which itself was off the trailing-12-month CPI read for March, which came in at +8.5%. Still, we like to see these figures shrinking manageably: too volatile and we might expect further irrational spikes in future months. The three-year Inflation Expectations report for April is down to +3.9%, 20 basis points lower than in March.

Speaking of CPI (Consumer Price Index), the April release is expected tomorrow morning — and it is expected these figures will also be shrinking from the highs we’ve seen earlier this year so far. Estimates for month-over-month CPI is +0.2%, 100 basis points lower than last month’s look. On core (stripping out volatile food and energy prices), analysts are looking for +0.4%, ticking up from the +0.3% reported for March.

But the real focus here, especially with inflation having sunk its claws into the U.S. economy — is in the year-over-year data, and here we see some moderation as well: +8.1% expected versus +8.6% reported a month ago. On core, last month was +6.4% year over year — both figures representing the biggest jumps in a very long time. Some downward surprises here would be most welcome.

That is, if market participants can shake the malaise that lay like a blanket over all market activity yesterday. So far, so good this morning: the Dow is +350 points ahead of the bell, the S&P 500 is +60 and the Nasdaq +300 points. It’s a mere drop in the bucket considering what we’ve been through in the past week, month and year — but you’ve got to start somewhere.

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