The storm is approaching

June 28 – July 4 2025

Big news. This is, of course, the adoption of Trump’s “One Main Beautiful Law.” And the point here is not that it is written in meaningful terms, hardly anyone can say that clearly: the law is very large and has not been thoroughly studied. Moreover, as is usually the case, it is most likely composed of different parts written by different groups. Accordingly, representatives of each of them do not really know what the others wrote.

Why is it important? Because it was adopted at all. Elon Musk’s protests show that not everyone liked it, and everyone and their dog discussed the obvious emission-inflationary aspects of it. The question is, why was it adopted? Party pressure alone was clearly not enough here; something else played a role.

In our opinion, this “other” is the understanding that it is practically impossible to avoid a collapse in the financial markets. And anti-crisis levers come into play. Some of them are contained in this law. The US has clearly decided to be the first and best prepared for the upcoming crisis, which, judging by everything, will begin before autumn. Of course, we cannot guarantee this, but the probability of a financial collapse is already so high that it is no longer possible to ignore the probability of its occurrence. Accordingly, we should be talking about immediate preparation for this event.

Macroeconomics: Mexico’s fixed investment is -12.5% ​​per year, excluding the Covid dip, a 16-year low:

PMI (an expert index of the state of the industry; its value below 50 means stagnation and decline) Indonesian industry (46.9) is at record lows (not counting Covid):

The same indicator for Canada is almost back to its April record low (and also without taking into account Covid):

New buildings in Japan -34.4% per year, the worst dynamics since 2009:

And the absolute value of the indicator is at a minimum for all 36 years of data collection –

Unemployment in Italy unexpectedly jumps to one-year high:

The number of unemployed in Germany has been growing monthly for 29 months in a row:

It has surpassed the Covid peak and reached its absolute peak in 14 years:

We draw attention to the fundamental circumstance: the sluggish structural decline in Germany has already brought the situation to a worse state than it was during the acute Covid crisis! The state of the economy, perhaps, is not yet worse overall than in the spring of 2020, but it is rapidly approaching that point.

Private sector employment in the US (ADP review) fell monthly for the first time in more than 2 years:

US labor force participation rate hits 48-year low (excluding Covid):

The number of people receiving unemployment benefits in the US remains at its highest level since October 2021:

Swedish Retail Sales -4.8% MoM, 31-Year Low:

Main conclusions: It is clear that if the real state of the economy approaches the collapse indicators of 2020 (and this is not only in Germany, but all over the world), then the financial markets should also correspond. And they have been growing in recent years. Accordingly, a collapse is inevitable.

Moreover, the situation was saved by colossal emission injections. And here we recall the “big and beautiful” law, which is exactly about this. Trump needs resources to support not even demand, but simply a normal existence for those who will become victims of the collapse. And the source of this money in the current situation can only be the budget.

We draw attention to the length of the working week in the USA:

It has decreased again, which indicates the acceleration of negative processes in the American economy.

In general, there is a sharp deterioration in the situation with real disposable income and expenses of American households. Real disposable income fell by 0.69% month-on-month (i.e. June-on-May). The situation with expenses is also not very good, the accumulated growth over six months is only 0.38%, which is the worst indicator since the 2020 crisis.

A more detailed analysis can be found in Pavel Ryabov’s (Spydell) analysis

“Real disposable income of US households fell by 0.69% m/m – this is the sharpest decline since the beginning of 2022, which is entirely due to the actions of the US government, which made a negative contribution of 0.71 p.p. due to the reduction in net government transfers in favor of the population (-0.63 p.p.) and a slight increase in tax collections (-0.08 p.p.).

However, even without taking into account the government factor, the dynamics are becoming weaker: 3 out of 4 components of the income structure excluding the government are declining (entrepreneurship, rental and royalty income, income from assets), neutralizing almost 90% of the positive contribution of the main category – wages and bonuses.

In other words, income excluding the government is near zero, but this was achieved due to wages, while all other categories are in the red.

To be fair, the very weak by historical standards indicators in May (this is usually bad in a crisis) were shown after very strong results in April – growth of 0.65% and in March – growth of 0.63% m/m.

▪️Real disposable income for 3M – 0.20% average monthly growth, for 6M – 0.18%, for 12M – 0.14%, for 5M25 – 0.19% vs. 0.28% for 5M24 with the medium-term norm for 2017-2019 at 0.25% and the long-term norm – 0.21%.

▪️The wage fund in real terms grew by 0.26% m/m in May, for 3 months – 0.36%, for 6 months – 0.20%, for 12 months – 0.20%, for 5 months of 25 – 0.21% vs. 0.29% for 5 months of 24, with a medium-term norm of 0.24% and a long-term norm of 0.21%.

Both in terms of income and wages, the beginning of 2025 is approximately 30% weaker in terms of growth than the first 5 months of 2024 and approximately a quarter weaker than the medium-term norm, i.e. incomes have a steadily declining trend, despite attempts to stimulate.

Net government support as a % of disposable income for 5 months of 25 was (-5.39%) vs. (-5.64%) for 5 months of 24, i.e. approximately a quarter of the income in 2025 the state subsidizes in favor of the population compared to last year compared to the medium-term norm (-6.6%) and the long-term norm (-5.88%). The closer this indicator is to zero, the higher the level of subsidies/incentives, i.e. now the state stimulates 1.3% of household income at the cost of accumulating a deficit.

▪️Spending on goods and services in real terms decreased by 0.28% m/m in May, for 3M +0.17% per month, for 6M +0.07%, for 12M +0.18%, for 5M25 (-0.03%) vs. +0.15% for 5M24 compared to the medium-term norm of +0.21% and the long-term norm of 0.2%.

These statistics show that the disposition with spending is very weak. The cumulative change over the first half of the year is only +0.38%, which is the worst indicator since the 2020 crisis.

Real spending growth of 2% or more occurs in conditions of an economic boom or active stimulation, while moderate growth according to the historical average is in the range of 1-1.5% over six months, now three times lower than the norm!

Over the past six months, spending has fallen three times, which is a harbinger of a recession in the short term.

Two main conclusions: incomes are slowing sharply, spending is growing three times below normal and has effectively stopped in 2025.

It is consumer spending that holds the US economy together. This is the strongest signal in five years of an approaching crisis.

There are more and more stable signs of the fading of the main driver of growth in the US economy – consumer spending, which has decreased by 0.16% since the beginning of the year vs. +0.77% in 2024, +1.5% in 2023, +0.94% in 2022 and an average of +0.9% in 2010-2019 for the first 5 months.

This is the worst start to the year since 2020 (then spending fell by 10%, but due to technical issues of forced blocking), before that, there was a minus for the first 5 months in 2009 (-0.43%), and even earlier in 1981 (-0.25%).

This is not just a signal of an approaching recession, it is ringing all the bells.

The dynamics of spending directly correlates with income, and this is interesting. I will conduct a more detailed decomposition of the structure of changes in real disposable income.

Non-government income (salaries, entrepreneurship, rental and asset income) decreased and made a negative contribution of 0.11 p.p. to the total change in income by (-0.69%) in May, for 3M +0.23 p.p. contribution, for 6M +0.13 p.p., for 12M +0.13 p.p., for 5M25 +0.13 p.p. vs. 0.19 p.p. compared to 0.19 p.p. in 2021-2023 and 0.26 p.p. in 2017-2019 at average monthly rates.

This is a clear slowdown – half as much as in 2017-2019 and a third lower than in 2021-2023 and last year.

The economy is no longer generating the required rate of income to support consumption. The state can replace the falling demand, but is it replacing it?

The US government significantly accelerated subsidies in February-April to demonstrate a “pretty picture” of economic stability, but in May they were forced to reverse.

The net state factor in household incomes provided a negative contribution of 0.58 p.p., for 3 months (-0.03 p.p.), for 6 months +0.04 p.p., for 12 months +0.01 p.p., for 5 months 25 +0.06 p.p. vs. 0.09 p.p. for 5 months 24 compared to +0.09 p.p. in 2021-2023 and (-0.01 p.p.) in 2017-2019 for the net contribution in accordance with average monthly rates.

…

The sum of the contribution from the two categories will be equal to the total change in real disposable income of American households on average per month for the corresponding comparison periods.

Overall, government stimulus is limited, before the normalization of government spending in May for 4M25 it was +0.22 p.p!

With the exception of one-off “actions of unprecedented generosity from Trump”, there are no resources for sustainable support, as in 2020-2021 or in 2008-2010. The budget deficit is already breaking all records.

There are non-government incomes, which are rapidly slowing down, and the savings rate is at an extremely low level.

Net savings in May amounted to only 4.5%, for 3M – 4.6%, for 6M – 4.3%, for 12M – 4.3%, for 5M25 – 4.5% vs. 5.2% for 5M24 with the norm of 6.2-6.5%.

There are no reserves left, there is nowhere to reduce the savings rate, the state has no money, and the private sector is actively slowing down.

I will note that these materials are an illustration, but they are not included in the basic part of the macroeconomic forecast. We provide them, on the one hand, to show the complexity of real analysis, and, on the other, to demonstrate that the basic indicators that we provide quite adequately reflect reality without getting into unnecessary details.

Returning to the main line, the Covid crisis comes up again and again… The situation in the US is comparable to Germany, in five years the economy returns to the same nightmarish indicators…

Accordingly, we strongly recommend our readers to take this circumstance into account in their work and/or business: it may not be the best idea to just go on vacation today, it is worth at least a little preparation for a possible crisis.