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Every U.S. earnings season gets hyped like the Stanley Cup Finals only to fall flatter than a Here Comes Honey Boo Boo rerun. With almost half of the S&P 500 reporting, the song remains the same – high operating margins, no sales growth and few signs of labour demand for an economy that desperately needs it.

Average year over year profit growth for the 236 S&P 500 companies on the books for the quarter is a mediocre 1.63 per cent. Top line sales growth is again lower at -0.4 per cent. With less revenue coming in the door, companies are increasing efficiency – which is just a euphemism for generating more output with the same number of workers. Or fewer.

Starting with the bad news for Canadian investors, U.S. energy and materials stocks have been particularly disappointing this quarter. Sales growth for the 18 (out of 41) energy companies is down 15.3 per cent year over year and profits are lower by 6.4 per cent. Profit growth in U.S. materials stocks was even worse than energy, down 8.7 per cent, but sales growth was a bit better at -4.5.

Much better news was apparent in the consumer sectors. Consumer goods companies (led by Netflix and Bed Bath and Beyond) translated 4.5 per cent revenue growth into a 9.7 per cent jump in profits. The S&P Consumer Goods index has seen a 7.0 per cent increase in profit on a 4.4 per cent rise in sales.

The oft-cited statistic that the U.S. consumer is 70 per cent of the economy is a bit misleading – it's the only country that includes health care spending in the category – but nonetheless, consumer spending is the major driver of the service-oriented American economy. As long as the corporate push for efficiency (rather than expansion) continues, wage growth will be in short supply and the world's largest economy will continue to stumble forward.

Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here to read more of his Insights, and follow Scott on Twitter at @SBarlow_ROB.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
NFLX-Q
Netflix Inc
-1.01%607.33

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