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Wednesday, April 28, 2021
But corporate concerns still abound.
The U.S. economy is roaring back to life and consumers are feeling positively buoyant.
But even with better-than-expected reports coming in from economic data and corporate results, we still see a relatively cautious tone being taken by some businesses.
The Conference Board's reading on consumer confidence published Tuesday registered its highest reading since before the COVID-19 pandemic began.
April's reading of 121.7 was a 12.7-point jump from March and the highest since February 2020. "Leading the gain was a record monthly advance of 29.5 points in the present situation index to 139.6, the highest since March 2020," said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.
Daniel Silver, an economist at JP Morgan, noted Tuesday that the report's expectations gauge — which measures how confident consumers are about the labor market, business conditions, and their incomes — is currently higher than it was pre-pandemic.
This data shows that after a huge surge in retail sales in March, consumers' spirits remain elevated. And combined with the vaccine rollout and a continued loosening of COVID restrictions, the U.S. economy looks set to have a huge summer powered by the consumer.
Corporates, however, still seem reticent to fully embrace the narrative of a booming U.S. economy that will continue powering better-than-expected results.
And yet the company still declined to offer investors a forecast for the rest of the year. On the company's earnings call, CFO Brian Newman added that, "we recognize there is still uncertainty ahead related to the pandemic and other factors that could interrupt the recovery, so we are not providing revenue or diluted earnings per share guidance at this time."
As The Earnings Scout notes, declining to offer a forecast makes life easier for management teams in an uncertain environment. And this is true regardless of whether these risks lie to the upside or downside of a baseline forecast.
But UPS specifically cited "uncertainty ahead related to the pandemic and other factors that could interrupt the recovery," which suggests negative or downside concerns prevent the formation of clarity on the state of the recovery. UPS does have some international exposure, which makes their outlook on the pandemic less unambiguously positive than how a U.S. consumer might see things. Yet UPS' revenue in Europe and Asia grew faster than in its U.S. domestic segment during the most recent quarter.
Tomorrow morning, the first look at first quarter GDP will be released, and with Wall Street looking for a 6.5% surge in growth the Atlanta Fed's GDPNow tracker suggests first quarter growth was closer to an 8% annualized pace, it seems that risks are still skewed to the upside.
And upside risks emerging is a theme we've seen in corporate earnings so far this earnings period.
But in a global pandemic — even an improving one — it is still safer for management teams and other policymakers to remain cautious in offering any prognostications about what the future holds. Or easier altogether to just keep your mouth shut.
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