Welcome to August, just one month left of Summer. The last of the county fairs are finishing up and the State Fair is just three weeks away. Time to start the pre Fair training, meter your calorie intake to store up capacity for the great Minnesota pig out. Keep your system prepared by eating greasy food but in moderation of course. Pick a day, buy an early ticket to save money and enjoy. Remember, Pronto Pups are different than Corn Dogs and by far are the better deal.
I warned you last week that this past week was going to be a doozy in terms of numbers coming out. The Fed cut the rate the expected 1/4% indicating they see softness but nothing that can’t be overcome. Had the Fed felt a cliff was coming they would have moved to a ½ point cut.
The ISM for July was essentially flat from June at 51.2, that was down .5 from June reflecting continued slower growth. At 50 we hit the break even point so August and September need a boost in manufacturing to avoid a contraction mode. The rest of the numbers and comments in the report are worrisome. This past month 9 of the industries reviewed showed actual contraction, that is the most since 2016. Employment moved from good growth to a 50 level indicating no growth in the industry. Imports as well as exports are contracting. Part of this is the tariff impact, the other is the strength of the dollar which is curtailing our exports. The last part of this is the world wide business contraction which inevitably had to reach our shores. Production edged to the 50 level also in July. Lastly, the back log of orders began to contract even with production slowing down. This is not good news for the rest of this fall.
Personal spending was good in June, the July numbers should be out shortly. We need to have the consumer continue to spend to keep the economy from sputtering into the 1% growth range. A very good sign was the Consumer Confidence level which came in much higher than June, posting a 135.7 for July. Between strong personal earnings and low inflation the consumer feels empowered for now. Personal debt continues to decline however, the US Savings rate is unchanged. Essentially we are spending what we are making.
The job numbers were flat from June through July. Primary hiring came from service and government, construction was also good. However overall it is not enough to boost the economy into a faster growth phase. While the labor participation rate improved, it is coming at the expense of productivity as the US Productivity fell during the second quarter. This is a sign that the quality of new hires is causing the employers to have to do more training, produce slower and/or experience more waste. Again to produce a stronger economy we need to improve our productivity as well stimulate demand.
So we are off to a slow start in the third quarter. Lets hope something comes along to stimulate the economy soon.
Have a great week.