Thoughts From The Divide: The Harvest

Even in times of turmoil (see President Lincoln’s Thanksgiving Day Proclamation), fall is a time to give thanks. And what should we be more thankful for than the gift of shopping? Retail sales reflected “continued resilience in the American consumer” and one might think recent Fed surveys are indicative of a new sense of optimism? The Empire Fed Manufacturing Survey’s headline index “shot up forty-three points to 31.2, its highest reading in nearly three years, and the six-month outlook showed that “firms remained optimistic about future conditions”. The Philadelphia Fed survey was not quite as ebullient in its reading of the current environment, the headline index dropping from 10.3 to -5.5 (a section headline drily noting “Most Current Indicators Soften”), but, on balance, the sense of optimism was palpable and mirrored the Empire Fed, (“Most Future Indicators Rise”) with the future activity jumping “from 36.7 to 56.6 in November, its highest level since June 2021”.
BY JON WEBB

  • Posted on November 22, 2024
  • by MI2 Research

“Set apart… a day of Thanksgiving”

Even in times of turmoil (see President Lincoln’s Thanksgiving Day Proclamation), fall is a time to give thanks. And what should we be more thankful for than the gift of shopping? Retail sales reflected “continued resilience in the American consumer” and one might think recent Fed surveys are indicative of a new sense of optimism? The Empire Fed Manufacturing Survey’s headline index “shot up forty-three points to 31.2, its highest reading in nearly three years, and the six-month outlook showed that “firms remained optimistic about future conditions”. The Philadelphia Fed survey was not quite as ebullient in its reading of the current environment, the headline index dropping from 10.3 to -5.5 (a section headline drily noting “Most Current Indicators Soften”), but, on balance, the sense of optimism was palpable and mirrored the Empire Fed, (“Most Future Indicators Rise”) with the future activity jumping “from 36.7 to 56.6 in November, its highest level since June 2021”.

We are not fully persuaded by the survey results, as sometimes expectations of the future are not always met by reality. On the consumer side, while retail sales may have beat expectations, the latest earnings from Walmart and Target offer a slightly more granular view of the situation. This article noted that the latter company’s disappointing earnings “may have reflected the financial circumstances and mood of U.S. consumers in the months before election day”. As Target’s CEO said on a call with investors, “consumers continue to spend cautiously, most notably in discretionary categories”.

“He which soweth bountifully shall also reap bountifully”

If the idea is that you reap what you sow, and there comes a time when the chickens come home to roost (forgive the mixed agricultural metaphors), Europe appears to have a lot of sleepy poultry. Case in point is the knock on effects of the deindustrialization, which we have covered a time or two. In addition to the auto industry, other elements of the industrial economy are beginning to cry uncle. The latest is the plastics industry. The FT notes in this article on the sector, explaining it as the “latest manufacturing sector on the continent to shrink despite global growth”, Mario Draghi joins others in attributing “much of the blame for the EU’s flagging economic growth to high energy prices, ‘restrictive’ regulations and lower cost production abroad”. An Ineos executive “said Europe’s bureaucratic and regulatory burden was a ‘self-inflicted wound’.” The solution is… regulating demand? The industry wants “targets for recycled content in everything from packaging to electric vehicles ‘because that will drive demand for circular plastics and that will help us’”. At least they’re being honest!

https://www.gocomics.com/calvinandhobbes/1995/10/15

 

P.S. There will be no Thoughts from the Divide next week, and we hope everyone who celebrates has an excellent Thanksgiving full of good food, friends, and family.

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