Market 03/14: PPI confirms persistent inflation

February PPI up: confirms sticky inflation situation from wholesale

Year-over-year (Y/Y): PPI higher than expected due to insurance services

February PPI: +1.6% Y/Y, higher than estimate +1.2% and previous month's +1%.
Core PPI: +2% Y/Y, higher than estimate +1.9%, though down from previous month's +2%

Year-over-year (y/y) increase mainly from services inflation (red columns):
- Main cause for services (y/y) inflation is insurance costs - similar to CPI situation 2 days ago (image below).
- Powell also confirms insurance costs play a big role in current sticky inflation situation:

Month-over-month (m/m): energy inflation returns in February

February PPI +0.6% M/M, double the estimate +0.3% and previous month's +0.3% — strongest increase since June 2022

Core PPI +0.3% M/M, higher than estimate +0.2% but lower than previous month's +0.5%

Similar to the CPI story 2 days ago: Energy costs +4.4% M/M, main cause of the overall index's +0.6% M/M increase.
=> Energy inflation has returned in the past month.
- Final demand goods prices +1.2% M/M - largest increase since August 2023.
- Final demand services prices +0.3% M/M after +0.5% M/M in January

→ Việt Hustler's conclusion: February PPI inflation both services and energy rose strongly compared to previous month.

=> Consistent with CPI data 2 days ago when energy prices in the CPI basket also started rising again.

Nominal retail sales not as expected - 'Real' sales decline for second consecutive month

February retail sales: +0.6% M/M, up from previous month's -1.1% but below estimate +0.8% M/M

January sales revised down from -0.7% to -1.1% M/M

Control group (GDP growth goods group) unchanged in February, after sharp decline previous month.

Building materials and automobiles are the two largest contributors to the monthly increase

Real retail sales (inflation-adjusted) decline for 2nd consecutive month

Fed faces choice: curb inflation or "soft landing":

Both CPI and PPI higher than expected causing bond yields to rise, but retail sales lower than expected pushing yields back down.
- High inflation pressures Fed to keep rates high, but retail sales data also supports Fed cutting rates to avoid recession.
- However, if choosing between curbing inflation and avoiding recession: Fed will prioritize curbing inflation!

→ Although 1-month data doesn't predict anything, but if inflation persists and GDP is low it could lead to the risk of stagflation (article conclusion section).

Initial jobless claims drop sharply, WARN layoff notices surge

Initial jobless claims last week fell to 209,000 (lower than expected 218,000)

New York claims drop sharply, overshadowing other states

Continuing claims at 1.811 million, lower than estimate of 1.905 million but up from 1.794 million last week

WARN layoff notices surge

Earnings updates: UiPath, SentinelOne, Dollar General

UiPath

Revenue: Record 405 million USD, +31% Y/Y, from strong demand for UiPath's automation solutions.
- Annual Recurring Revenue (ARR): 1.464 billion USD, +22% Y/Y
- New ARR: 86 million USD
- Customer retention rate: 119%
Operating income: 15 million USD
Cash, cash equivalents and short-term securities: 1.9 billion USD

SentinelOne

Revenue: 174.2 million USD, +38% Y/Y due to strong demand for cybersecurity solutions
- ARR: 724.4 million USD, +39% Y/Y
- Number of customers with ARR over 100,000+ USD up +30% to 1,133
GAAP operating margin: up from 68% to 72%
Cash, cash equivalents and short-term securities: 1.1 billion USD