U.S. CPI up 3.0 pct in June as inflation continues to cool

U.S. CPI rose 3.0% YoY in June, lower than market expectations of 3.1%. Excluding volatile food and energy prices, the core CPI rose 3.3% YoY, lower than the previous value of 3.4% and the expectations of 3.4%, the lowest since May 2021. The slowing in consumer prices was driven by a sharp decline in gas prices and easing shelter price pressures (inflation coming from the housing market). Gasoline prices fell 3.8% MoM in June, following a 3.6% decline in May. This contributed to the 2% MoM decline in the energy index for the second consecutive month. Shelter prices increased by a softer 0.2% MoM rise in June than the 0.4% rise in May. Owners’ equivalent rent (OER) and the rent index both rose by only 0.3% MoM, their smallest gains since August 2021.

The food index rose by 0.2% MoM for the second consecutive month, as food away from home prices rose 0.4% MoM and food at home prices rose 0.1% MoM. The continued rise in food prices was offset by the declines in energy and transportation prices. There were also price increases in motor vehicle insurance, medical care, and household furnishings and operations. Meanwhile, prices fell among airfares, used cars and trucks and communication in June. Airfares have markedly declined despite recent resilient travel demand. It is expected this trend could reverse in the next two months given the recent rise in jet fuel prices which are often followed by rises in the airfares index. In terms of the US stock market, the S&P 500 index maintains a stable upward trend, and we expect the S&P 500 index to fluctuate between 5,400-5,800 points.

In terms of industry, US consumption is still resilient and can support the consumption sector. Investors can pay attention to related companies with outstanding performance.

eBay (EBAY.US)’s revenue in 1Q24 amounted to US$2.6 billion, up 2% YoY, surpassing the market expectation of US$2.53 billion. This performance reflects eBay’s stable market position and has delivered a promising quarter despite macroeconomic challenges. Its strategic advancements in first-party advertising yielded a remarkable 30% YoY revenue growth, attesting to effective monetization strategies. Gross Merchandise Volume (GMV) stood at US$18.6 billion, up 1% YoY. Of which, GMV of U.S. market totaled US$8.97 billion, flat YoY, accounting for 48.2% of the total GMV. International GMV reached US$9.65 billion, up 3% YoY, accounting for 51.8% of the total GMV.

In the first quarter, eBay’s gross margin was 72.6%, which expanded by 50 bps YoY. Net income from continuing operations was $439 million. Looking forward to 2Q24, eBay expected revenues of $2.49-$2.54 billion. On an FX-neutral basis, revenue growth was anticipated to be -1% to 1%. GMV for Q2 was likely to be US$17.8-$18.2 billion. It is recommended to buy at US$52.50, target at US$59.50, and stop loss at US$49.00.

PDD(PDD.US)’s total revenues in 1Q24 amounted to RMB86.8 billion, an YoY increase of 131%. Net income in the quarter was RMB28 billion, an increase of 246%. In terms of business segment, revenues from online marketing services and others reached RMB42.4 billion, an YoY increase of 56%, reflecting improved monetization efficiency for user traffic, backed by sustained iteration and innovation in ads tools. PDD’s DAU-to-MAU ratio was 52.7% in April 2024, way ahead of its peers (Taobao/JD/VIPshop: 42.4/21.6/22.0%), denoting stronger user stickiness.

Revenues from transaction services stood at RMB44.3 billion, a YoY increase of 327%, mainly due to the rapidly increasing commissions of its domestic main e-commerce platform, and increased share of commissions for Duoduo Grocery. Temu’s semi-consignment mode was first adopted in the US in mid-March. The higher AOV (average order value) and lower fulfillment cost of this mode were expected to generate a better profitability. It is recommended to buy at US$138.00, target at US$156.00, and stop loss at US$128.50.