For your daily reminder that the US economy might be rolling over, we go to Goldman’s Analyst Index, which fell by 2.6 points in August to 48.2.
That is the lowest since April 2017.
Breaking things down, Goldman notes that the sales and shipments component fell 5.9pt to 50.2, while the orders component slipped further and remains in contraction at 40.1. The bank cautions that the orders-less-inventories gap “has been negative for the past eleven months”, a state of affairs that “could signal a further slowdown”.
(Goldman)
Goldman says the abrupt escalation of trade tensions in May might have signaled to businesses that a protracted Sino-US dispute is the most likely scenario, prompting them to plan accordingly. “That anticipation of further trade war escalation may explain the seemingly restrained movement in the GSAI and across other surveys in August despite the announcement of tariffs on the remaining $300bn of imports from China earlier this month”, Goldman writes.
Still, the bank cites analyst commentary suggesting that further tariff escalation has “dampened [the] outlook’ for some sectors”.
Note that a GSAI of 50 generally equates to an ISM manufacturing index level of 53. One can’t help but connect the dots there on the way to asking whether a GSAI of 48.2 might well presage a contractionary ISM print on the horizon.
If so, that wouldn’t bode well for the president at a time when consumer sentiment is deteriorating and the 3-month moving average for payrolls is headed sharply lower.
IHS Markit’s gauge fell into contraction for the first time since 2009 this month.
We’re gonna need more “insurance” cuts.
