Why wholesale prices matter

Ever wonder what KFC is forking out for “processed young chickens” these days, or how much a paper maker pays for a pound of wood pulp? Me neither.

But wholesale prices do affect the costs of consumer goods, not to mention corporate earnings – or lack thereof - and hence jobs, the stock market and other tangible aspects of our fiscal well-being.

For the fundamentals on the monthly Producer Price Index, which will be released Tuesday by the Bureau of Labor Statistics, check out its comprehensive Web site and tutorial. Like the CPI discussed in a previous tipsheet, the PPI measures the cost of goods and services – in this case, raw or semi-finished materials sold to businesses.

For your corporate coverage, talk to executives about how their financial strategies fluctuate with the inflation rate. Many airlines, for example, have been recording profits or losses based more on the outcome of their fuel-price hedging rather than on the fares we pay for our munchkin-sized coach seats. Other industries stock up on or speculate in the raw goods that make up their products; see if major local employers will they’ll share economic forecasts and the reasoning behind them.

Housing data mania next week

Just a heads up that, as usual, the last two weeks of the month teem with housing data that can help you layer anecdotal stories with statistics. Among the releases coming up:

Aug. 17: National Association of Homebuilders housing market index
Aug. 18: Commerce Dept. housing starts, building permits
Aug. 19: Mortgage Bankers Association applications
Aug. 21: National Association of Realtors existing home sales
Aug. 25: S&P Case/Shiller home price index
Aug. 26: Commerce Dept. new home sales

This Reynolds Center centerpiece by Stephanie Riel offers invaluable hints for covering today’s residential real estate market. And here’s a past tipsheet with related advice.

Bored with the same-old, same-old? Try writing from a non-consumer point of view. It must be pretty grim trying to earn a living as a Realtor these days -- talk to some about their livelihood, fallback plans and whether they’re moonlighting to keep the cash coming in. Imagine the irony of finding a real estate agent who’s in foreclosure herself, or a mortgage broker who can’t make his own house payment. People in those lines of work were all but beating off business with a stick a few short years ago, but when you’re in commissioned sales the downturns really sting.

Also feeling the pain: Homeowners’ associations. Strapped consumers are withholding condo maintenance fees, leaving association boards hamstrung when it comes to paying vendors and repair firms. That starts a downward spiral of declining amenities and sub-par maintenance which doesn’t exactly help move real estate in a stagnant market.

Come back to Your Daily Tipsheet each morning for advice on where to find sources, background and creative ways to make financial news and trends relevant to your audience.

Unlocking the Earnings Enigma

Let’s face it, most journalists aren’t numbers gurus. Sure, there are some exceptions: I know one who used to take MIT math courses “for fun” … shudder.

But while most of us could happily while away the afternoon paging through a paperback thesaurus, those tickers scrolling beneath the CNBC anchors might as well be ancient hieroglyphics and the phrase ‘balance sheet’ has about as much appeal as ‘spinal tap.’

There’s no getting around it for business writers, though – particularly during earnings season, an expression you’ve no doubt heard a lot of this week. It means that many publicly traded corporations have closed their books on the preceding quarter and are ready to announce whether or not they made a profit in those three months. Earnings season, obviously, comes around four times a year. The implications are watched both for individual companies and for the overall health of the economy – and the stock market will gyrate accordingly.

Yahoo! Finance offers a really handy day-by-day earnings calendar that isn’t as cumbersome as those published by major stock markets. Get in the habit of skimming the look-ahead view so you can prep for earnings announcements of companies in your territory.
Many large corporations release at 7 a.m. or otherwise before the market opens, so you might have to get up early in order to post results online in real time. Make sure you’ve set up executive interviews and obtained the password for earnings-related conference calls ahead of time, not the day of the release when investor relations pros are at their busiest.

Other companies announce earnings after the markets’ 4 p.m. close, which can make for a real scramble on deadline for print editions. Again, pre-arranging interviews and getting the cell phone numbers of key analysts and executives will streamline your task.

Your Web and graphics editor will thank you if you provide historical figures – a five-quarter look back is typical – before the day of the release, so those charts can drawn off deadline. Get the figures from the company’s investor relations site; they’ll also show you how sales and earnings have fluctuated at that firm.

The trick with an earnings story is not to simply rewrite the press release; sales and income figures are key but you must provide some context for the numbers. In this Minneapolis Star-Tribune story,Liz Fedor reports Monday’s results from industrial supplier Fastenal Co., succinctly including the effect of the release on the company’s stock price and background about job cuts.

If the company is a landmark in your area or a major employer, don’t limit your reporting to experts; get reaction from workers, suppliers and retirees who hold those corporate shares in their portfolio.

Still wondering how to interpret the numbers? Just in the nick of time, the Reynolds Center next week will present “Understanding Financial Statements,” a free, online seminar you can attend right from your desk. The award-winning presenter, James Gentry - a veteran financial journalist and instructor – will lead you through the mysteries of the balance sheet, the income statement and more. It’s a small time commitment that will immeasurably boost your comfort level and your ability to cover financial news with authority. Or if you can't make the weeklong seminar, check out Gentry's one-hour tutorial on financial statements.


Come back to Your Daily Tipsheet each morning for advice on where to find sources, background and creative ways to make financial news and trends relevant to your audience.