Chart of the Week - Sales Growth Trends
Chart of the Week - Sales Growth Trends
Checking in on sales growth trends across global equities...
Chart of the Week - Global Sales Growth Trends
From Boom to… This week we’re looking at how sales growth is tracking across global equities. The below chart shows the year-over-year change in total trailing revenues for non-financial companies across 45 countries.
The blue line shows the median growth rate across that group. I use the median because if you just used market cap-weighted it would skew too heavily to the US, and a simple average would get skewed around by outliers. So this approach gives us a more accurate sense of the trend in sales growth globally.
But I’ve also included the breadth of sales growth — or more specifically the proportion of countries who are reporting negative growth figures (i.e. the latest trailing 12-months of sales were lower than the previous year’s figure).
In that sense, the red line is basically like a warning signal of weakening sales growth globally — and often will light-up during global recessions. Taking a breadth and global sales barometer approach like this allows us to detect emerging signs of strength and weakness, and get onto changes in the fundamentals as it happens.
In that respect it is worth highlighting the current downturn in sales growth rates generally and rising proportion of countries seeing falling sales.
We should expect to see something like this during an inflation shock and subsequent disinflation episode. Companies basically receive inflation: at the limit, corporate sales growth will be more or less in line with nominal GDP growth. And since nominal GDP gets a boost when price-levels rise, then companies will likewise see a lift in sales just by virtue of higher prices.
Naturally, if we were to see further disinflation (or even deflation) — that’s going to show up in the form of weaker sales growth. In that respect it may not necessarily be a sign of imminent recession, but it does present an objective data point that things are slowing on the sales growth front. And after a period of substantial, rapid, and widespread monetary tightening, we should expect to see weakening in demand — and for sales growth to come under pressure.
Key point: Globally sales growth is slowing; going from boom to bust.
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Aside from the chart above, we looked at several other charts, and dug into some intriguing global macro & asset allocation issues on our radar:
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