Yikes! New Scary Report JUST Out MINUTES Ago!

the Holy Smokes we just got some numbers

I just finished the course remember live

stream and then I look and I go oh my

gosh we just got these numbers here

we've got to go through them this is

actually a big deal for the economy

we'll go through the actual report as

well let me just get started with the

numbers because

oh boy okay you ready for this first of

all construction spending was revised

down in the prior report construction

spending month over month up 0.9 in this

report this is generally driven by real

estate uh building and investment uh

you're seeing a lot of residential

construction starts we had a blowout

last month because there's so little

housing inventory so Builders are like

okay we'll build more than if people are

going to keep paying for these houses

that's on the real estate side of things

which is actually a good contributor to

GDP helps keep us out of potentially

recession but more importantly these ISM

numbers you ready for this ISM

Manufacturing

seventh month of contraction in a row

comes in week at 46 versus 47.1 a number

under 50 is recessionary contractionary

not good uh so less manufacturing not so

great for the economy however some good

news ISM prices paid

huge Miss

Hugo Miss I mean we were looking at a 44

read a number under 50 is contractionary

right we're looking at 44 for prices

paid so contractionary we got

41.8 big Miss look at some of the quotes

from the actual report and it'll really

give you an idea of sort of this mixed

economy where where we're trying to

stabilize like land the plane or keep

flying the plane who knows about the

analogies anymore these days but listen

to some of these quotes here and I think

they'll give you some insight into

what's going on out there and then we'll

uh we'll add some commentary obviously

after the fact so all right you ready

for this here we go uh seventh month of

contraction after 30-month period of

expansion for manufacturing the price

index Inc it registered a 41.8 percent

down 2.4 percent compared to May

that's good we want prices to go down

the U.S manufacturing sector shrank

again losing ground indicating a faster

rate of contraction not great so faster

kind of collapse in manufacturing not

good as a potential leading indicator

for those recessionary concerns right

and ultimately we don't want to go into

a recession right that's a problem now

there are some bright spots in this as

well softness continues and optimism

about the second half of 2023 is

weakening okay that's not good this is

not a good report not good so far demand

eased again I mean clearly price

pressures are gone in manufacturing

right because obviously demand is is

weakening here now take a look at this a

potential bright spot

customers inventory index drop to the

too low territory now this is for

leading orders so there's a potential

leading indicator that you're going to

see a turnaround in inventory where

companies start buying inventory again

which contributes to GDP but also

increases the expenses for those

companies right EPS goes down

potential bright spot though again for

manufacturing if you get new reordering

okay of the six biggest manufacturing

Industries Only One Transportation

equipment registered any growth in June

and suppliers have capacity this is not

an inflationary Market that we're in

this is an absolutely slowing down

economy the question is can we slow to a

level where we're not in recession and

just get through this nasty period of

high interest rates that's the tough

part and the slowing is clearly here

like If the Fed only read this report

there's no way in hell they should raise

rates again

customers are less inclined to purchase

far in advance

according to the computer and electronic

product segment yeah keep in mind this

is the problem that you had with end

phase as well there excuse me

their wholesale buyers pause buying

because they just sold through the

inventory they had remember nface

doesn't sell directly to a customer they

sell to a wholesaler and then the

wholesaler sells to a customer uh or or

you know individual like electricians

maybe who then install you know install

the equipment on behalf of a customer so

you have these multiple different layers

in between

when you get that order reordering

that's when a company like Enphase does

well and so it looks like maybe that

Supply capacity is available but you're

not getting as much wholesale

buy-through because people are sort of

delaying these purchases they don't want

as much inventory on hand anymore

because they figure ah the manufacturer

will have it why did you have a lot of

that during covid where people were

hoarding inventory because it took

forever to get a new shipment

because of all the supply chain snarls

now you don't have supply chain Styles

you want a product snap your fingers it

shows up the suppliers are like we're

ready we're ready to ship it when do you

need it you know it's a totally

different environment now you don't have

supply chain supply chain shortages you

don't have an indicator here of an

inflationary explosion this is this is a

reiteration that inflation is not the

problem the problem is how much is this

economy going to slow down uh and does

it crash land or do we keep going and so

you get some mixed commentary here

listen to some of this commentary our

company thought the second half would be

better than the first half but that

doesn't seem to be the case customer

orders have definitely slowed down

that's in chemicals

there were concerns the second quarter

was going to fall whether it was a

softer second quarter however demand has

remained stable this is in

transportation equipment so kind of a

little bit of both sides here right

there's an elevated level of capital uh

review that's going on because of the

recession well not delayed spending and

planning or being prioritized that's for

more restaurants Market is stabilizing

for petrol

healthy backlog for Machinery North

America demands stabilizing but European

markets showing slowing for fabricated

metal

halfway through the year while things

are challenging we may be doing all

right non-metallic metallic material

mineral products input costs for

materials continue to decline again

deflationary deflationary deflationary

deflation everything is deflationary

with exception of wages see pricing is

stabilized but labor costs remain high

demand is trending to about 2019 levels

adjusting for inflation

covid driven demand has moderated in

paper products so what do you what do We

Gather from this sort of Rapport uh well

what we're really hearing is

things are returning to a mean this is

very normal keep in mind what a return

to a mean looks like if this is your

economy like this and then you get a

massive stimulative well you get a shut

down the economy moment then you get a

massive stimulative economy now you're

getting this sort of return to mean the

goal is not going negative that's the

goal we don't want to go negative but if

we're just returning to mean of course

things are going to slow down when it

gets really dirty is if we start seeing

inflation take off and while we might

see core inflation stay hot because the

summer travel and the Tremor travel

season although hopefully CPI sort of

adjusts for that after all they do

seasonal adjustments because of that

this summer travel season might be

particularly hot though we'll see but

anyway other than that core inflation

potentially popping up from travel it

does not seem like there's really any

lingering inflation yes wages are still

higher but the there's certainly no wage

price spiral and if anything demand is

really suggesting a a normalization uh

is is this are these commentary items

here a sign of definitely recession no

absolutely not but there's definitely a

sign that the fed's slowing of the

economy is functioning prices are stable

so while I'm gonna pay attention to this

to see if things continue to Trend worse

for some of these industries which could

be a recessionary indicator this report

on its own I think is great news for

inflation and

okay news on the economy it might be a

little tilted bearish here but otherwise

okay I'm okay with this since there will

be a normalization expectation so my

take fascinating report just out minutes

ago thanks

now I want you to know this when it

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but

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