Something that is about to fall will fall anyway

September 7-13, 2024

Big news. US manufacturing falls into deflation again:

The August figures are quite serious, -0.8%, or -9.6% on an annualized basis. Some will say that this is good, that it means lower inflation, etc. In reality, it means a serious downturn in industry.

At the same time, the industrial inflation index PPI, which evaluates not all goods, but only the last ones in the technological chain, grew quite a bit in August:

What does this really mean? That final products are increasingly being replaced by imports, which are growing quite slowly (August 2024 to August 2023 only 1.7%), but still growing. But intermediate industrial products of American manufacture in technological chains are forced to reduce prices in such a situation. Since there are fewer and fewer consumers for them… In other words, there is a serious industrial downturn.

Macroeconomics. Production in the manufacturing industries of the Netherlands -4.4% per year, 13th monthly minus in a row:

Industrial production in Italy -3.3% per year, 18th negative in a row:

In the eurozone -2.2% per year, the 14th minus in the last 15 months:

This is with official inflation. With real inflation, there has been a constant decline since autumn 2021.

Swedish industrial orders are at their worst level in 7 years (excluding Covid):

Construction output in Sweden is down 7.5% per year, the 18th consecutive negative. During this period, the dynamics of the indicator are such that it was worse only in 2009:

Canada’s PMI (48.2) is the weakest since March 2015 (not counting Covid):

Eurozone investors (Sentix review) are pessimistic at their most in 8 months:

And business in Australia – for 9 months:

China’s PPI (Industrial Inflation Index) -0.7% m/m. Biggest drop in 14 months:

And -1.8% per year, the worst dynamics in 4 months:

Loans in China +8.5% per year, the absolute minimum for all 27 years of statistics:

The number of employees in Britain is -59 thousand per month, not counting Covid, this is an anti-record for all 10 years of observations:

The ECB cut rates by 0.25% to 3.50%. That (along with expectations of easing from the Fed next week) has caused another wave of growth in gold prices:

And oil prices fell to a nearly 3-year low due to overall weakness in demand (especially Chinese):

Main conclusions. The industrial data is sad. For the US, China and the EU. And this means that the rate in the US must be categorically reduced. This means that grounds are needed. They were demonstrated in the form of the August CPI (consumer inflation) index:

True, the “clean” index (minus the highly volatile components of fuel and food) rose in August:

But we can choose not to talk about it, right? Powell didn’t say. So the picture here looks absolutely clear: the rate will be lowered. The only question is by how much, by 0.25% or by 0.5%.

At the same time, of course, the question of inflation will arise. Since it has not fallen much in recent months, it will most likely begin to grow with the easing of the credit and monetary policy. And the time lag here will be minimal, since the economic system is contracting and the money supply has nowhere to expand. And then there is the “bubble” on the stock market.

If we add that real inflation in the US, even according to some American experts, is already 8 percent (and according to ours, it is about 10%), then the picture becomes completely sad… And we must prepare for the corresponding consequences!

Well, we congratulate our readers on the fact that they have known the situation for a long time, and therefore can calmly rest on the weekend and calmly prepare for the upcoming work week!