Sales per share is often an interesting indicator to look at. Charts 6 and 7 below do just that, the first by geography and the second by industry. While the first suggests that the decline in the total (world) sales per share is fairly broad, the second suggests the decline is concentrated in four sectors: energy, materials, financials, and utilities (indeed this pattern can also be seen in Chart 8 which shows operating profit margins by industry).
Nevertheless, it is clear that sales growth in the current cycle has been much weaker than in the previous two cycles. This is a reflection of the weak economic growth posted since the crisis. Why growth has been weak is a hard question to answer. Renowned economist Larry Summers has put forward a number of arguments as to why growth has stagnated in the US, many of which may also apply in other major developed economies.
I shall be looking at Summers’ research in more detail in next month’s letter.
Published in Investment Letter, June 2016
The views expressed in this communication are those of Peter Elston at the time of writing and are subject to change without notice. They do not constitute investment advice and whilst all reasonable efforts have been used to ensure the accuracy of the information contained in this communication, the reliability, completeness or accuracy of the content cannot be guaranteed. This communication provides information for professional use only and should not be relied upon by retail investors as the sole basis for investment.
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