Well, we now have what looks like the first contraction-territory business indicator, courtesy of a sub-50 print on MNI’s Chicago PMI.
The gauge sank to 49.7 in June from 54.2 the previous month. Consensus was expecting 53.5. No economist, out of 25 surveyed, expected a contractionary reading (the range was 51-56.6).
New orders fell into contraction territory as well, hitting the lowest since January of 2017. The majority of firms said they see the tariffs having a negative impact on their business.
This is yet another reminder that, very much contrary to the incessant propaganda that spews endlessly forth from President Trump’s Twitter feed, US businesses do not, in fact, benefit from the trade war. The vast majority of companies understand that the tariffs are, at best, a drag on activity and, at worst, a potential disaster.
The contractionary print serves to underscore the notion that the US economy is decelerating and that with the fiscal impulse having waned, the US is no longer immune from the slowdown abroad.
The data stateside has rolled over noticeably of late, with one of the more amusing examples being a record drop in Empire Manufacturing current conditions.
And don’t forget about one of the largest drops in consumer confidence since the crisis, which, hilariously, hit just a day after Donald Trump declared this month “one of the best months of June in history”.
As ever, the perverse silver lining is that the worse the data, the more likely the Fed is to deliver on market expectations for rate cuts. In that respect, this sub-50 read on a business activity indicator is exactly what the doctor ordered.