Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Liquidity Drives Q-Ratio to Record High, as Manufacturing Productivity Becomes Crucial for Inflation

Misguided US Stimulus Offers Little Help to Supply-Side to Offset Potential Inflation Risks

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

Concerns about rising input costs for US corporations adversely impacting both operating margins and inflation have risen in the aftermath of fiscal stimulus. There is, however, lingering upward pressure on corporate costs due to continued tariffs with China, as well as the threat of higher outlays to meet tougher environmental protocols in the future.
Various unemployment measures remain well-above their previous cyclical lows, making unlikely that the Fed will remove monetary accommodation soon, but prospective wage pressures are not uniform across all sectors of the economy. Labour supply shortages in sectors most impacted by the pandemic have produced elevated job openings, thereby sowing the seeds for higher wages to attract workers.
The ability of companies to pass-on cost increases to customers will vary significantly by sector, largely depending on the underlying level of optimism about future demand conditions. Companies in sectors where demand is strong, such as housing, stand a better chance of passing through higher costs to final selling prices.
The shift in US economic activity towards services should mean that rising material input costs should have less impact on aggregate corporate profit margins, while  labour costs will have the biggest impact, irrespective of the sector. Restaurants could, for example, pass on higher costs in the wake of fiscal stimulus as consumers may temporarily tolerate higher prices due to rebates and elevated savings. Technology firms should have the ability to pass through higher costs, but the response of the corporate sector to prevent margin erosion will depend on the confidence of companies to achieve productivity gains.
Economic shocks usually degrade potential GDP growth, but US companies have adapted very quickly to adjust to a new pandemic business environment and, moreover, they have not relinquished efforts in the realm of product innovation. Large companies could, however, potentially gain the most during the current expansion due to their technological leadership, thereby making it imperative for higher productivity to be well-diffused across all sectors and company sizes to boost the US economy's non-inflationary growth potential.

Concerns about rising input costs for US corporations adversely impacting both operating margins and inflation have risen in the aftermath of fiscal stimulus. There is, however, lingering upward pressure on corporate costs due to continued tariffs with China, as well as the threat of higher outlays to meet tougher environmental protocols in the future.
Various unemployment measures remain well-above their previous cyclical lows, making unlikely that the Fed will remove monetary accommodation soon, but prospective wage pressures are not uniform across all sectors of the economy. Labour supply shortages in sectors most impacted by the pandemic have produced elevated job openings, thereby sowing the seeds for higher wages to attract workers.
The ability of companies to pass-on cost increases to customers will vary significantly by sector, largely depending on the underlying level of optimism about future demand conditions. Companies in sectors where demand is strong, such as housing, stand a better chance of passing through higher costs to final selling prices.
The shift in US economic activity towards services should mean that rising material input costs should have less impact on aggregate corporate profit margins, while  labour costs will have the biggest impact, irrespective of the sector. Restaurants could, for example, pass on higher costs in the wake of fiscal stimulus as consumers may temporarily tolerate higher prices due to rebates and elevated savings. Technology firms should have the ability to pass through higher costs, but the response of the corporate sector to prevent margin erosion will depend on the confidence of companies to achieve productivity gains.
Economic shocks usually degrade potential GDP growth, but US companies have adapted very quickly to adjust to a new pandemic business environment and, moreover, they have not relinquished efforts in the realm of product innovation. Large companies could, however, potentially gain the most during the current expansion due to their technological leadership, thereby making it imperative for higher productivity to be well-diffused across all sectors and company sizes to boost the US economy's non-inflationary growth potential.

Rising Input Costs Pose Threats to US Profit Margins and Inflation, but Secular Degradation Unlikely