Commentary: A Recession Comes Into View
Goshen resident Roberts Sinche is a financial professional with over 30 years of experience .in global economic, investment, and financial market analysis.
The good news is that the impact of tariffs on pricing and the consumer has not yet become obvious. The bad news is the economy is looking quite soggy already. Following the sharp downward revision to the Payroll Employment data that, ironically, brings that data more in line with reports from ADP and the Conference Board's Jobs Hard To Get Index, the Institute for Supply Management (ISM) reports for both the Manufacturing and Services sectors suggest an economy that is near stall speed. The Composite Purchasing Manager’s Index (PMI) fell to 49.9 in August, bringing the 3-month average to just 50.1, with two of the last three monthly readings just below the 50 level associated with little/no growth. Recent readings would be consistent with a further slowing of Year-On-Year (YOY) Real Gross Domestic Product (GDP) growth towards 1%, about half the 2.0% YOY growth recorded for the year ended 2Q (2nd Quarter). Another GDP at/near 0% during 3Q could clearly create peril for the ongoing tenure of Commerce Secretary Lutnik.
While much of the focus of the impact of tariffs is on the cost and flow of imports, equally important will be what the foreign sector demands from US producers. As with Imports, there was a surge in US Exports into April as US producers pushed out product in advance of higher input costs and any retaliatory tariffs. Of concern, the level of Exports has fallen below the 3-month average by a meaningful amount, suggesting that weakening Export levels run the risk of weakening domestic Production and Employment. In this context, the 94% probability of a rate cut at the September 17 Federal Open Market Committee (FOMC) Meeting appears completely justified.
