Several people have made queries about the current state of our national economic condition against the backdrop of disconnected data points that seemingly conflict. Here’s my review.
July and August are key months to gauge the prior six months of U.S consumer positioning.
Why?
Because all advance purchase orders for the U.S. holiday season are made in May, June and July for inventory builds and delivery schedules for September. The decisions made by purchasing officers in late spring and early summer, reflect their predictive analysis for the holiday season.
Inventories are evaluated, critical financial discussions are held, and orders are placed for September arrival and distribution. This predictive activity is what we see in the July and August data that flows from the global, multinational and shipping corporations who facilitate the transfer of the goods. Check what is happening in distribution, and you can see what eventually creates the boxcar effect in the supply chain that ultimately leads to shuttered manufacturing.
Those who are involved in the business of shipping goods are signaling the flares around the state of the consumer economy and what will happen. At the same time, the wording is almost hilarious in this era of great pretending. Instead of saying ordinary words like “poor sales results for durable goods,” the parseltongue calls sales, “destocking.” Example: “CEO Vincent Clerc said he saw no sign that the destocking which has curbed global trade activity would end this year.”
Global shipping company Maersk is warning that shipping volume is low because warehouse inventories are high. The goods are unsold.
(Reuters) – […] CEO Vincent Clerc said he saw no sign that the destocking which has curbed global trade activity would end this year.
“We had expected customers to draw down inventories around the middle of the year, but so far we see no signs of that happening. It may happen at the beginning of next year,” Clerc said at a media briefing. “Consequently, the uptick in volumes we had expected in the second half of the year has not occurred,” he said. (read more)
The lack of shipping leads to a review of inventory status for the warehouses who would receive the goods.
Bulging Warehouses – […] A review of corporate statements and briefings shows more than 30 U.S. and European companies, including Hugo Boss, Heineken and A.P. Moller-Maersk, 3M Co and Stanley Black & Decker complained that destocking hurt their second-quarter performance.
Retailers particularly have struggled with stocks of clothing and footwear as consumers splurge on holidays rather than goods as they did during pandemic lockdowns.
The downbeat outlook comes amid low expectations for second-quarter results as China’s post-pandemic recovery slows. Refinitiv I/B/E/S data shows U.S. and European companies are expected to report their worst quarterly results in years.
Companies which stockpiled last year are finding it harder to shed inventories when higher borrowing costs and inflation crimp consumer demand, corporate executives and analysts said.
In the euro zone, stocks of finished products hit records in August last year and destocking only started in May, based on latest euro-zone manufacturing data.
In the U.S., an analysis of U.S. Bureau of Labor Statistics by CFRA Research showed business inventories soared by 20% in mid-2022, the biggest jump on record based on data that goes back to 1993. Retailers led the trend – raising inventories by a quarter from a year earlier.
The date in this next paragraph is key:
[…] The U.S. inventory-to-sales ratio was 1.4 in May, up from 1.33 a year ago, which means retailers, manufacturers and wholesalers have more inventory than they can sell at a higher rate than a year ago. (link)
When purchase order decisions for the holiday season of 2023 were being made, the inventory levels were higher than 2022. This is KPI (Key Performance Indicator) data, because the holiday of 2022 was a total mess.
Holiday sales last year were exceptionally weak as wage earners were struggling to pay for higher prices in essential goods and services, fuel, oil, heating, energy, gasoline, food and shelter. The lack of consumer purchasing for non-essential goods and/or luxury items resulted in poor sales last year, and the inventory levels are actually higher this year than last year when this year’s purchasing decisions were being made. That reality drops purchase orders. The dropped purchase orders lead to Maersk saying they are shipping less goods.
Now, let’s get USA domestic…. because it’s all connected. For that let’s turn to the U.S. Postal Service:
USPS DATA – First-Class Mail revenue increased $221 million, or 4.0 percent, on a volume decline of 678 million pieces, or 5.9 percent, compared to the same quarter last year. Shipping and Packages revenue remained relatively flat while volume declined 41 million pieces, or 2.4 percent, compared to the same quarter last year.
Marketing Mail revenue decreased $333 million, or 8.8 percent, on a volume decline of 2.6 billion pieces, or 16.0 percent, compared to the same quarter last year. The Marketing Mail decreases were driven by the continued decline in advertising spending due to economic pressures experienced throughout most of the fiscal year, a higher inflationary environment affecting print media production costs. (link)
So, let’s put it all together….
Consumers did not buy stuff. As a result, spring inventories were high. Purchasing managers forecast weak sales. Summer purchase orders were very low. Shipping companies reflect declines in shipping because the purchase orders were low. Advertising and marketing budgets were cut to meet the decrease in consumer spending. Consumers are not forecast to spend this holiday season.
The economic pie is getting smaller.
Keep in mind, this is all intentional. This is all part of the outcome from “managing the transition” to a new energy economy.
As you are well aware the various western nation central banks including the U.S. Federal Reserve, are raising interest rates into a global economic contraction, a drop in demand. Raising interest rates into a contracting economy is counterintuitive, it runs against the expressed interest of government to grow economic conditions. However, there is a purposeful design to the contradiction. [A TLDR Version Here]
The central bankers are trying to support western government policy. Unfortunately, the government policy they are under obligation to support is the fundamental energy shift, or what the World Economic Forum (Davos Group) has called the “Build Back Better” climate change agenda.
Monetary policy can only impact one side of the inflation challenge. The western bankers (EU central bank, U.S. federal reserve bank, and various banking groups) are raising interest rates in order to “tame inflation” by “taming demand.” However, as you know the global economic demand has been declining for several quarters. Raising interest rates into an already contracting economy only does one thing, it speeds up the rate of economic contraction.
Economic contraction is the lowering of economic activity. Raise interest rates -in a general sense- and businesses invest less, borrowers borrow less, consumers purchase less, employers expand less, and the economy overall slows down. When the economy turns negative, meaning less products and services are produced, we enter a recession. Some businesses and employers do not survive a recession and subsequently unemployment rises.
During recessionary periods people buy less stuff, people have less income stability, and economic activity drops. When the banks raise interest rates into an economy that is already stalled or contracting, unemployment and general pain on Main Street increases. Workers are laid-off, incomes shrink, consumer spending drops and that leads to less employment. Recessions are bad for middle-class and working-class people.
However, that said, there is one benefit from a recession…. Energy use drops.
I really appreciate these posts that put an easy to understand air on something that is sometimes hard for me to get on my own.
After reading something like this I think – thats really simple and believable. Even though I might never have come to that conclusion.
Thank you.
Was going to repost this to a few sites,BUT i think too complicated for the average Joe & Jane. most not in the league of of this group which is sad.
I disagree. Sundance writes with such clarity that uninformed, if they are really interested, are able to understand and formulate informed decisions.
I sold it as “Buzzword Bingo for Understanding the State of the Economy”
CTH is so prolific day after day! I totally appreciate what you do and to all of the Treepers as well.
Retired Magistrate here: Whenever we need anything such as small appliances, clothing, home goods, etc. we go to estate sales. Items are priced very reasonably and some items have never been used. We often go the last day when items are 50% off and the people who run the sales are willing to make deals.
I was blessed with parents who survived the Great Depression and World War II and learned how to make do. They taught me well and I pass this information on to anyone who will listen.
It would appear we suddenly have two Marcias now?
Deconfliction efforts might be advisable.
I recognize our Retired Magistrate as our first and long-standing Marcia, so perhaps our second would consider a revision that would not confuse us all with another fka scenario . . .
Our “Retired Magistrate” has such a unique and intelligent voice, that I believe almost all Treepers immediately recognize her writings.
But yes, we have had similar conflicts in the past with people who wish to be the “one and only”. Who could forget the “fka or LULU” dust ups?
Agreed.
The new gal seems sane though, so who knows?
I been wrong before . . .
🙃
“Marcia! Marcia! Marcia!”
We need a Cindy or a Jan or a Mary Ann or a Ginger.
“Imposter Marcia”?
Don’t believe so, seems innocent at this point, which is saying something as troll troubles have me side-eyeing all noobs these days.
Marcia Too, Marcia 2, Marcia Two
Marcia, I just had this conversation last night with friends found during a church “boomers” gathering for new attendees. We all had parents who lived through the depression and WWII. The lessons we learned from our parents to live within our means and to work at any job whilst you are looking for a better job or a chance to start your own business has served the 6 of us well. We all take advantage of estate sales, 2nd hand shops, etc. Alas, all of us agreed that our children and grandchildren will not have learned these lessons as we did from our parents even though we all tried to instill these same things into them. Americans are spoiled in today’s world here in the USofA.
Interesting. My neighbor drives over the road for a large contract trucking company that hauls durable goods and specialty foods up and down the East Coast. Just this weekend he commented that drop offs and pick ups at various distribution whses usually involved long waits for open docks. He said this past week in NY and NJ and even PA he was able to back up to the dock no waiting and was unloaded in record times. Same thing for pickups. So there’s just not the truck traffic especially now that some of those holiday orders are delivering to retail distribution centers. Also I do all my shopping for nearly everything from home improvement to food online so I’m registered at several online retailers. Recently I’ve been barraged with sales, offers of discounts and special coupon offerings for one day only. From what I’m experiencing I can say consumers are simply not buying.
A little personal anecdote. I got a Linkedin email yesterday indicating that a former business colleague is looking for a job due to a “restructuring”. He is in an in demand position with a top company. Storm clouds forming ?
Serious question. What are some of you doing with you 401’s?? I’ve minimized my involvement in the market. I don’t feel comfortable as apparently some do with gold. I see it as a hedge perhaps but nothing else
My two cents worth ( maybe not worth that much😉)
Here in Canada most of our Retirement account money is now in cash. One year guaranteed terms paying 5.75% tax free ain’t bad.
Our “ Big Five “ banks pay a decent dividend and are way off past highs.
Are Americans allowed foreign stocks in 401s
Canadians can buy U.S. stocks for their retirement plans.
Cheers!
I have most of my 401k (85-90%) in Treasuries. A 5% return is better than playing Russian roulette on the market. You can’t time the market, but you don’t want to be there for the crash (the older you are, the more this applies).
I’m about to retire. My 401Ks, in aggregate, bounced back from last year so I’ve just opened a SDIRA account.
I think I’ll buy some land and may a rental house, or two.
Money is going away from the Casino.
Our personal accounts are now at 5% in IRAs at the credit union.
Buy land. YES. Choose your location carefully; evaluate it from all relevant perspectives.
Good question. Here we keep the 401k with about 12 month short term cash for SHTF worst case (in 4.5% money markets), remainder 60% foreign/domestic stock 40% (intermediate term) bonds. Then some gold / silver coins. Also a years supply of in ground propane storage and firewood for winter. Also the traditional survival foods etc. One must be flexible, helpful to others, and innovative with our resources. And always stay informed, knowledge truly is power. Sundance has been a blessing giving us the news!
I put a lot into a Healthcare ETF. My reasoning– people gonna get sick at the same rate in any type economy. I hope this is great protection against a 20% drop in the market that financial guys call a “correction.” And wouldn’t a recession be just what the Obozzo crowd wants? To wreck America.
At the rate, the clot shots are taking people down, it is good to put money into organizations providing care. Insurance companies of all kinds are a bad place to be right now and going forward.
Good Discussion. There is a battle between recession and the inflation caused by printing $$$. I’m not sure which will win out. I’ve raised some cash (15% or so) but have been reluctant to sell more.
When they feel they need to do it, a tyrannical government, which ours is fast becoming, will confiscate gold. I don’t see it as a safe haven. Not in today’s ever expanding authoritarianism.
I don’t see this happening, the dollar is no longer linked to gold
While one should have some gold, coins or bullion, not numismatic, it is insurance against the loss of reserve currency or potential collapse of the US$. It is not an investment. The loss of reserve currency is a process that has been occurring for at least a decade and is happening at a faster pace with BRICS on the international scene. But it is a decade off from being up front and personal. Everything in the markets is overpriced and 5% on treasuries does not begin to compensate for inflation.
We all need to be prepared for the supply chains to fail, for industry to fail, etc. We need well stocked food pantries for depression era conditions. We need tools to make/preserve food. We need tools to make/fix clothes. We need books and knowledge for skills. We need tools to fix cars/bikes. We need alternate ways to power our homes, cook our food, heat our homes and wash clothes. We need resilient communities. We need stashes of commonly used medications.
We do not need to be experts at everything but we need to know people who are that we trust. We also need things we can trade – sin items – fire starters – small things. If the government collapses, we need to be able to trade for stuff.
Bannon had someone on who said Florida’s energy bills will go up 3x to 4x in the next 5 years. I can’t afford triple my energy bill without serious food budgeting. So, I hope I have my garden beds fully set up by then.
Agreed: small units of gold and silver (bars and bullion) will serve as barter. Small blocks of brass and lead composites will do likewise.
We cashed out our retirement accounts and took the tax hits. We have no debt, paid off house and cars, and bought PMs. We keep cash on hand, and invested in things like a new roof and deck and home and car maintenance. We also started preparing for hyperinflation with long-term storage items.
FJB.
Has anyone else noticed Costco adding more product to floor spaces, typically at ends of aisles? This is in addition to the storage racks above the floor. I’ve seen this in several Costcos recently and figure the added displays are equivalent to maybe two truckloads per store. If this is a conscious decision, it’s brilliant, and tends to support the fact that warehouse space is getting very tight in the USA.
No matter what they say, they still cannot hold a candle to Venezuela, which claimed with a straight face that their toilet paper shortages were being caused by their food programs working.
That right there is some chutzpah.
THANKS FOR THE CHUCKLE!!! BRILLIANT!
This is due to the interest rates and inflation. We all knew this would happen because that’s precisely what’s supposed to happen when they raise the interest rates. We will be fine. No one’s buying anything until they stop raising, I can tell you that much,
I am wondering about the numerous LARGE warehouses being built along I-81 around Harrisonburg, VA.
Anyone know why companies would invest in building warehouse space now? There already are many very large warehouses along that stretch of I-81.
I see the same thing around Commerce, GA on I-85. Miles and miles of new warehouses.
Alternative to selling product at reduced prices that are below the cost of replenishment. Also, as the international supply chains collapse due to war and rumors of war and changing geopolitical situations, having warehouses of stuff from overseas allows stores to continue in commerce when there is no product coming in.
I would have appreciated observations about the number of US banks that are going to fail because of bad bond investments and the collapse of commercial real estate. With vacancies ranging from 25-40% in major cities and the consequent collapse of real estate values we hear zip. I am reminded of the 2006 bank crisis when the Wall Street Journal published one article about the state of the variable loan market for mortgages, then a blackout. What happened next was predictable. I believe we are watching a financial collapse beginning, aided and abetted by the same geniuses who brought us Disney and Bud Lite. Inflation is compounding, debt is rushing towards a Weimar conclusion, our politicians devise ways to strangle innovation and enterprise while rewarding the indolent, the violent, the perverse and the crazed. I have prepared for years and me and mine will escape most of the consequences of greedy politicians, anarchists and communists. I doubt most Americans will not be damaged beyond repair by what is coming.
My main worry is that these financial crisis’s are usually a prelude to revolutionary change. Our last depression saw peaceful abet revolutionary changes. The next will be violent, akin to the violence that Weimar experienced or pre revolutionary France. What comes after that? “The deluge.”
The only way some of these companies can get rid of merchandise inventory is to stock up their Blue-city stores, let the shoplifters steal it all, and then the company can write it off as a loss.
The price of gasoline has gone up 30 cents in the past five weeks because FJB has pretty much tapped out the Reserves and you will see it rise to the levels of near or over $4.00 a gallon in the near future because we don’t have the reserves to make it artificially lower!!! The Recession coming up will be rough!!! 🤬
It’s over 5 bucks in Orange County, CA.
LA County? Don’t even ask.
We’re sitting on HUGE oil and natural gas deposits too.
Only Democrats could sit on huge natural resources and have shortages. Like their lack of planning for disasters in Lahaina.
I’m in N.J. and recently got gas for my truck at $3.58. Across the street it was $3.75! Two weeks ago it was $3.40.
Yeah ,it’s pretty predictable.
Yet people can’t comprehend it 🤔
Witnessed what I thought was the canary in the coal mine
regarding Maersky a few months back. Around February.
Was in Tybee Island Georgia, for a few days get away. Normally
you can look out at the beach and see about 3 to container ships
pass by, coming to or from Savannah harbor, in an hour or less.
Savannah is a MAHOR port. The two days that I was there I saw
about 5-06 ships TOPS during roughly 4 hours combined I was
at the beach. Commented here about it back then, thought I’d
bring it back up to support Sundance’s article.
Energy use drops
And there you have it…
But also, only the largest corporations survive, they lose their competitors and therefore the oligarchs and bankers who own/control the large multinationals and banks make more money.
Dropping energy use is just a way for the corporations to get their way, they really don’t care which way it’s done. It’s just that the Progressives are more efficient at implementing the Globalist Agenda.
Hence, Climate Change and less energy use.
This is why the likes of Putin and BRICS are such an existentialist threat.
FJB.
3800+ jobs lost.
https://randolphrecord.com/klaussner-furniture-industries-inc-to-close-all-facilities/?fbclid=IwAR1n-NjSE308kCIWggDuD331c0YBDDjeixKw6cjuJV_6ssM1XhbSPJzaEv0
Bidenomics – all for me and none for thee
The WEF and I believe, the UN see the US as the largest consumer and through their logic, the largest contributor to Climate Scare. Shrinking the US economy, is key to cooling the planet in this scheme. Our Royals(ruling elite scumbags) need this to better establish the separation between us and them. They will own everything by bankrupting everyone else and keep up dependent on their largesse.
We are coming full circle. We have thrown off the yokes of servitude to the Royals but now they have built the new Royal families that now want the world as their kingdom. We must stop them now or we will be dependent on them for everything, including our very lives
Oh, that explains the “exceptionally large increase in warehouse fires”…………it’s called destocking now, new meaning are so abundant when propaganda is in play.
Sundance, you forgot to mention China exports to the US were recently reported down over 20%. I think that says a lot too.
Add to this news the recent downgrades to US debt and the downgrading of several custodial banks and regional ones. All the signs are flashing RED.
Have not yet nailed this down completely and hope other treepers can add content to this “data point”, if it is one: discount stores like Marshalls, TJ Max, and Bealls outlet used to be a good alternative to find nice bargains of 6-12 month old merchandise (clothing and housewares). I seem to remember in 2015 – 2019 the shelves were well stocked and rotating frequently with “new” stock BUT during the 2020 lockdown the shelves became less abundant and more importantly have never returned to pre-lockdown levels. Is this because first level retailers have too much of the old inventory that remains unsold and more importantly, manufacturers have less replacement “new” stock to send to first level retailers due to never recovering from the lockdowns? I think one can see the same stale product offerings in other non-first level retailers like the various “dollar” store offerings, which interestingly are now North of $1.25.
This seems to be a significant data point that has been staring us in the face for going on three years now. Hope others reading this can add their observations – is this BS or is it something significant?
Is that why my Home Depot smoke alarm with lithium 10 year battery went off at 4 am after 18 months? The new one was at least twice as costly. But THAT receipt is stuck to the refrigerator for a decade.
There is a reason the Saudi’s(OPEC) – who we are dependent on once again – cut production…
End of “Disinflation” Honeymoon: CPI Accelerates YoY. Core Services CPI Accelerates MoM. Durable Goods Prices Normalize at Nosebleed Levels
by Wolf Richter • Aug 10, 2023 • 82 Comments
Core services inflation at 6.1% year-over-year; Core CPI at 4.7%. Three factors make it rough for CPI the rest of the year.
https://wolfstreet.com/2023/08/10/end-of-disinflation-honeymoon-cpi-accelerates-yoy-core-services-cpi-accelerates-mom-durable-goods-prices-normalize-at-nosebleed-levels/
David Hay: Wall St Says No Recession Risk, But Many Red Flags In Real Economy
10 Aug 2023
Correlates with the drop in cardboard box sales and projections. Fewer products are being shipped.
Yellow Freight declaring bankruptcy is another indicator of lack of activity.
And even with all this, Ford is declaring massive losses due to lack of sales of electric vehicles and a city in MN, Bloomington, is going down the road of building extensive EV charging infrastructure with sales of EV’s having a negative outlook by one of the largest manufacturers.
Remember all the vehicle inspection facilities built at enormous cost across the nation, only to be torn down when it was discovered that the vast Majority of vehicles were not problems? Anyone get fired for that?
One can only hope that Ford is first among the major automakers to fail. They have sooo earned that right.
I could tell that inventory was not moving by the number of emails I’ve been getting from companies I buy from for myself, all touting more and more discounted prices. There’s a sense of desperation by the sellers out there.