America's economy is cooling fast. The mighty American middle class consumer has apparently gone on a strike, shunning everything except going on vacation and dining out, the two activities he/she missed during pandemic closures. Real retail sales (adjusted for inflation) are now flat or slightly negative, after whipsawing violently down/up in the pandemic - chart below.
Imports of everything from plasma TVs to t-shirts are languishing on store shelves and retailers are discounting heavily to move the merch. Walmart, Target, Amazon, et al are issuing one sales/earnings warning after the other.
Accordingly, container shipping rates are coming down fast, albeit from nosebleed levels - chart below.
Because the merchandise isn't selling, it has to sit in warehouses. California's enormous Inland Empire warehouse area is now filled to the max, with vacancies at record lows - chart below.
Consumer sentiment is ambivalent - they feel that current conditions are ok, but their expectations for the future are quite grim, lowest in 10 years -
chart below.No question, consumers still have lots of money sloshing around and jobs are plentiful. This explains the present situation reading and why the economy hasn't fallen off a cliff. But, they also see prices for basic necessities soaring, which explains their views for the future.
And what is the Fed doing? Basically, net really very much. Yes, they have raised short term rates to pre-pandemic levels, but they haven't drained any money from the system, the one action that would truly make a difference in fighting inflation - see chart below.
Fed Balance Sheet
PS I am really curious why Mr. Powell claims in Congressional testimony that the Fed has already taken steps to shrink its balance sheet. It isn't showing in the data..
...for Powell and the Fed, thinking about thinking about maybe thinking about maybe doing something, is akin to taking steps, lol.
ReplyDeleteIn fairness, they have announced what they WILL do. See today’s post:)
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