US Economy Witnessing ‘Remarkable’ Drop In Demand

US Economy Witnessing ‘Remarkable’ Drop In Demand

The US economy is downshifting in real time. On the heels of similarly underwhelming anecdotal data out of Europe, flash PMIs for the US came in woefully short of estimates on Thursday, magnifying recession concerns, while perhaps allaying some fears of over-tightening from the Fed. The preliminary read on S&P Global's manufacturing PMI for the US tumbled to 52.4, down dramatically from May. It was the worst print since July of 2020 (figure below). The new orders gauge dropped precipito
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4 thoughts on “US Economy Witnessing ‘Remarkable’ Drop In Demand

  1. High energy prices are a major contributor to the current inflation and to recession risk. The normal market response would be for oil and gas companies to take the extra cash from high prices and invest it into producing more oil and gas. Except Western governments are now working to prevent that response. They are refusing permits for exploration and for transportation infrastructure (pipelines) and imposing “windfall” taxes. In short, they are punishing attempts at investment to fix the problem and then blaming producers for not doing what governments are telling them not to do.

    Even with demand destruction, let’s call it what it really is: impoverishment of the citizenry, I think we are going to be stuck with high energy prices for many years. We lack capacity to increase supply and governments are working to keep it that way.

    I have no idea how we get out of this mess. Governments have stuck their fingers in their ears and renewable energy is far more resource intensive to bring online. solar power needs 20x as much material as nuclear for example, to construct the same power generation capacity. Renewables are going to take ages because we have to mine a LOT of stuff out of the earth to produce them.

    In Europe, gas shortage is not accelerating renewable energy, it is instead forcing them back to using coal. No energy, no food production. This is existential.

    1. @Free Capital – how do US policies explain the lack of production hikes in other nations?

      In the SA, after the junk and sub-prime debacle lenders lenders to and investors in shale oil producers demanded that the companies focus solely on dividends and buy-backs. No capex, please!

    2. In my region, especially in KS and MO, there is a lot of NIMBY politics. Alternate energy development is being hampered by any means possible — wind turbines make cows deaf, new wires cause cancer — whatever. And still, we are exporting energy, while considering a gas tax holiday. Since new roads come out of our pockets anyway, this is just a backdoor subsidy to oil cos.. First we sell our SPR, with no effect except it’s gone. Now we are shipping our non-renewable energy resources offshore. Where are the adults when we need them?

    3. @Free Capital – lead time to bring new production/refining online is three to five years at least. Energy companies are not going to “take the extra cash” and invest it in the way you think.

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