Early reads on US business activity for April painted a subdued, stagflationary picture, not surprising given the sheer amount of uncertainty hanging over the economy and the expected impact of tariffs on consumer prices.
At 51.4, S&P Global’s services sector gauge managed to stay in expansion territory, but not by a lot. Consensus wanted 52.6 from the update. The range from 15 economists who ventured a guess was 51 to 54.
The flash read for April was the second mediocre print in three months. March’s headline was solid, but February not so much.
On the manufacturing side, 50.7 counted as a beat. Consensus there was 49, which is to say economists expecting a contraction-territory print were pleasantly surprised.
The composite reading underwhelmed, slipping to 51.2, a 16-month low, versus 52 expected.
These aren’t good readings. They’re not outright bad, either, but the outlook is, and that’ll eventually undercut capex and hiring in the absence of clarity on trade.
Apropos, the color accompanying the release flagged a third straight deterioration on a gauge of output expectations. On that score, US corporates are the least optimistic since July of 2022, which is to say since headline inflation was running near 9% and the Fed was hiking in 75bps increments.
Notably, sentiment among services providers was the worst since October of 2022, when US equities troughed for the cycle. “Growing numbers” of firms are worried about what the release described as “government policies” and the read-through for economic uncertainty.
Chris Williamson, S&P Global’s Chief Business Economist, was overtly cautious, describing a “marked slowing of business activity,” “a slump in optimism” and “intensifying” price pressures, the combination of which is “creating a headache for a central bank which is coming under increasing pressure to shore up a weakening economy just as inflation looks set to rise.”
He was unequivocal about the impact of tariffs. Companies are raising selling prices “at a pace not seen for over a year” and higher prices “will inevitably feed through to higher consumer inflation, potentially limiting the scope” for Fed cuts.
Feels like almost all that matters now is i) how quickly will Trump walk back his tariff fiasco by making trade deals and in particular when with China? and ii) will Trump otherwise refrain from destabilizing the economy/financial system or what remains of US financial credibility?
Even if there was a principal’s office with a chair to which Trump could be handcuffed, this pouty little playground bully would never say uncle to save face. Nor would any of his minions. I have noticed that since the minor ear reduction he suffered last fall he …”don’t get out much anymore.” That’s got to be hard to take.
Minions, good one. I like Amen corner, and echoing sycophants, but they are interchangeable.
WSJ
“The Trump administration is considering slashing its steep tariffs on Chinese imports—in some cases by more than half—in a bid to de-escalate tensions with Beijing that have roiled global trade and investment, according to people familiar with the matter.”
My guess is that so long as US is in process of brilliantly 3D chess retreating from 125% tariffs on China, neither macro data nor company earnings/guides will matter.
I believe (i) no, he will not walk back anything, as he has bet it all on tariffs tariffs tariffs as the way to remake the economy in his image, and there will be disruption, trade deals or not. And (ii) no, there will be refraining if destabilizing gives him more power, which it will.
Will he posture and say that deals are being made, while they aren’t? Will tariff amounts remain confusing and impossible to plan for? These are yesses, and the mildest of the disruptors we can expect in the coming months. The old world is gone. The risk-free rate has already become a hypothetical, we’re just not admitting it. The coup is already in place, it’s the rollout we’re watching.
My guess, DT sees stagflation coming, barks at Powell scaring markets (insiders trading), reverses and market goes up (insider trading), goes cool on Powell to make sure he gets all the blame when stagflation hits. He had to get attention on Powell, so he barks at him…..6-9 months from now when the sh*t hits the fan we will only remember he let Powell have his way on rates, now DT can take over, hire his puppet and be the hero of the mess he created.