This Week’s Economic Update, June 24, 2024

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Midway through 2024.  We just passed the longest day of the year.  While some consider this the first day of summer, others have a bit different view.  My mother-in-law, always a pessimist, maintains that all is lost, the days are getting shorter and will not stop until December.  I always tease her by calling on June 21st and wishing her a happy first day of winter.  Of course, she always wishes me a happy first day of summer on December 21st, so it all equals out in the end.

Unless you work in, or are in the process of either purchasing a vehicle, or servicing your vehicle you likely did not know that the US experienced its second major cyber attack of the year.  The first attack was in February which strategically went after Change, a firm owned by United Healthcare.  That virtually shut down the medical industry as payment submissions and care reports could not be submitted.  That attack created significant delays in payments and cash flows throughout the medical industry.  The lingering impact continues here in June.

The second cyber attack came last Wednesday, hitting over 15,000 auto dealerships nationwide.  Both this attack and the one on Change were orchestrated from Eastern Europe, either Russia itself or Belarus.  The attack hit a company called CDK which provides reporting, paperwork, inventory control, scheduling and about every other support for car dealerships.  As an example, the Penske Dealership network uses CDK.  Dealerships were unable to complete vehicle sales after the Wednesday attack.  All the negotiations were lost on pending sales.  Schedules as well as service work information were also restricted so customers looking for repairs are locked out.  Parts sales are also on hold since invoicing services are unavailable.  This disruption will show up in the June 2024 economic numbers related to all things.  It certainly appears that the US is in a war and just has not recognized it yet.  These two attacks are likely the open salvo of future attacks that will come along later this year.

Retail sales are soft but stable.  A revision in the April retail spending showed that it had dropped to a -.2% from a slightly positive number.  The May retail number came in at .1% with a fear that may also be adjusted down into negative territory in upcoming reports.  When you take out auto sales the consumer spending was negative in May.  This all-important core retail number reflects the consumer is becoming much more cautious in their choices going into the summer months.  We need to watch this trend in the next two months to measure the temperature of the retail side of things.  This could be a leading indicator for the election.

The upper Midwest has suffered through two years of drought.  The dry weather impacted the cattle industry the most.  As ranchers experienced a shortage of hay and other feed for their herds, they sold off the head over the last 24 months.  Now comes the rain.  The Midwest has been deluged with storm after storm, from Iowa, Nebraska to the Dakotas, Minnesota and Wisconsin.  Flooding throughout is rampant.  In southern Minnesota there are corn and soybean fields that have a walleye chop in them on windy days.  Farmers are already filing for crop insurance on the losses.  There appears to be ample supply of both corn and soybeans as many farmers held last years harvest back from the market in hopes that prices would rise. 

While off the peaks in late April, 30-year mortgage rates remain in the upper 7% level.  As the rates have slightly abated, new mortgage applications rose by .9% last week.  This was after a strong 1.5% the week before.  This jump came from new purchases as the refinance applications dropped.  This jump should show up in the numbers for new permits and housing starts in July.  The May numbers for the housing market were soft, but this appears to be turning around.  There is also some indication that existing house listings are starting to stay on the market longer, mostly due to being overpriced.  In some areas, the initial list price is being discounted as offers are not forthcoming. 

Have a great week.

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