MANUFACTURING PMIs

Eurozone: PMI dips back into contraction as eurozone factory orders decline

The HCOB Eurozone Manufacturing PMI slipped back into contraction in September, reversing the first improvement seen in over three years during August. Falling from 50.7 in August to 49.8, the headline index signalled a deterioration in factory operating conditions across the euro area. That said, the decline was only marginal overall.

Across the eight monitored euro area nations covered by the Manufacturing PMI survey, there was an even split between those in expansion and those in contraction. At the top of the rankings was the Netherlands, where conditions improved at the fastest pace since July 2022. Greece and Spain continued their growth trends, although upturns slowed on the month. The final eurozone country in expansion mode was Ireland. Weakness was recorded across the currency union’s three biggest economies – Germany, France and Italy – with respective Manufacturing PMIs posting below the critical 50.0 level.

Pulling the headline index into the contraction zone was a marked decline in its weightiest component, new orders. After rising for the first time in almost three-and-a-half years in August, the volume of new orders received by eurozone manufacturers decreased in September. The pace of contraction was mild but nevertheless the fastest since March. Export markets were a drag on total sales, with new business received from overseas falling for a third month in succession and to a slightly stronger degree. That said, manufacturing production volumes expanded, stretching the current sequence of growth that began in March. The upturn lost momentum, however, easing from August’s solid pace.

Further growth in output was achieved despite ramped up job cutting at eurozone factories. Workforce numbers fell at the quickest rate in three months. Manufacturers were also able to make greater inroads to their backlogs of work in September. The rate of reduction in outstanding orders was the most marked since June.

Purchasing was reduced by surveyed companies at the end of the third quarter. After coming close to stabilising as recently as July, the rate of decline in buying activity has accelerated in back-to-back months. Subsequently, manufacturers’ demand for inputs shrank at the steepest pace since April. Destocking remained prevalent across the goods-producing sector, with both pre- and post-production inventories falling at solid rates during the latest survey period. Stock depletion came amid evidence of pressure on supply chains as delivery times lengthened to the greatest extent in just shy of three years.

For the first time since June, eurozone manufacturers reported lower operating costs – a notable deviation from the solid inflationary trend witnessed across the survey on average. The decrease was only marginal, however. In turn, eurozone manufacturers responded by lowering their own charges. This marked the fifth month in succession that surveyed businesses have discounted prices.

Looking ahead, euro area goods producers were optimistic that output would be higher than present levels in 12 months’ time, although expectations were their weakest since April.

Japan: Output declines at quickest rate in six months in September

The headline S&P Global Japan Manufacturing Purchasing Managers’ Index™ (PMI^®) fell from 49.7 in August to 48.5 in September. Posting below the crucial 50.0 value, the index signalled a modest deterioration in the health of the sector that was the most pronounced since March. Business conditions have now worsened in 14 of the past 15 months.

Intermediate goods producers recorded a solid deterioration in conditions, while both consumer and investment goods segments recorded only marginal rates of decline.

Weighing on the headline PMI was a solid and accelerated decrease in manufacturing output during September. Furthermore, the rate of contraction was the quickest seen in six months, with survey respondents often linking the fall to reduced inflows of new work.

The overall amount of new business placed with Japanese manufacturers fell at a solid rate that was the fastest since April. Companies often mentioned that weaker market conditions had dampened customer spending and made clients more cautious with regards to their inventory levels.

New export orders also decreased again at the end of the third quarter. Though solid, the rate of contraction eased from August’s 17-month record. The latest drop in export sales was partly linked to lower demand across China and the impact of US tariffs.

Hiring activity meanwhile slowed notably in September. Moreover, the latest increase in employment at Japanese manufacturers was the weakest recorded since February and only fractional.

At the same time, there were further signs of spare capacity, with outstanding orders falling further in September. Notably, the rate of backlog depletion was the sharpest seen since January. Companies often mentioned that fewer new orders had enabled them to process and complete unfinished workloads.

Reduced customer demand also led firms to cut back on purchasing activity again in the latest survey period. The rate of reduction was the second-quickest recorded over the past year-and-a-half and solid. Companies also downwardly adjusted their inventories of both purchased and finished items.

Although input buying continued to decline, average supplier performance deteriorated again in September, and at the fastest rate in a year. Some monitored companies linked longer lead times to stock and labour shortages at suppliers.

The rate of input price inflation edged up to a three-month high and was sharp. Companies often linked higher expenses to increased raw material and labour costs. However, the pace of inflation remained much slower than that seen on average over the first half of the year.

Manufacturers responded to higher input prices by raising their output charges in September. The rate of inflation quickened from August to a solid pace that was stronger than the series long-run trend.

Japanese goods producers were generally confident that output will rise over the next year. However, the degree of positive sentiment slipped to a five-month low, with some firms concerned that reduced customer spending and US tariffs could dampen their performance.

Asia Manufacturing PMIs Show Diverging Impact of Tariffs Goods producers in Japan and Taiwan flagged deteriorating demand

S&P Global’s latest purchasing managers indexes showed a broad uptick in output at the end of the third quarter, but also weak spots in exports as trade uncertainty simmers, keeping demand subdued.

Goods producers in export powerhouses Japan and Taiwan flagged deteriorating demand in September, and optimism about the outlook soured.

Firms in Taiwan noted steeper falls in output and new orders, amid reports of muted global demand tied to U.S. tariffs and client hesitancy, S&P said.

That was echoed in the Japan survey too, where sentiment hit a five-month low and manufacturers reported softer demand in key markets like China, said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.

On the flipside was South Korea. S&P’s manufacturing PMI for the export heavyweight rose above the 50 mark separating expansion from contraction last month. New export orders rose for the first time in six months amid improving demand from key markets in Asia.

Things were brighter in China too. Both production and demand stayed in expansionary territory in September, with new export orders returning to growth for the first time since March, according to the RatingDog PMI compiled by S&P Global.

Other countries in Southeast Asia also saw a pickup in new orders and purchasing activity. (…)

For Shivaan Tandon, emerging markets economist at Capital Economics, the Asian PMI data wasn’t much to cheer about.

“The September PMI readings for most countries in Asia remained weak and we continue to expect manufacturing activity in the region to struggle in the near term,” Tandon said in a note.

Growth in Asia’s economies looks set to weaken through the end of 2026, he said, as tighter fiscal policy and softer exports offset resilient consumption.

Labor Market Going Nowhere

The latest JOLTS report furthered the notion that the labor market is merely running in place. Openings were little changed in August, keeping the vacancy rate at a cycle low of 4.3% and the number of openings just below the number of unemployed workers. With hiring demand still tepid, more workers are opting to stay put in their current job, further tempering upward pressure on wages. A low rate of layoffs remains one of the few bright spots in the jobs market, but the low quit rate elevates the risk of layoffs jumping higher.

Source: U.S. Department of Labor and Wells Fargo Economics

Demand for labor is being hit on multiple fronts. Rapid technological change, concerns over the growth outlook following changes to trade and immigration policy and the federal government’s efforts to shrink its workforce have all weighed on job availability this year. These forces were on display in the August JOLTS figures, which showed the vacancy rate remaining at a cycle low of 4.3%.

The dwindling availability of jobs has been noticed by consumers. In a separate report this morning from the Conference Board, the share of workers viewing jobs as “plentiful” less those viewing jobs as “hard to get” fell to a fresh cycle low. The more timely (and stable) picture from Indeed job posting shows the downward slide in hiring intentions, while moderating, has yet to be arrested, fueling our caution over the near-term pace of employment growth even as layoffs remain low.

Overall, firms’ appetite to hire remains tepid. The hiring rate slipped to 3.2%, its lowest since last summer’s lull in June 2024 and unseen in nearly a decade before then. At the same time, employers remain reluctant to let go of existing workers. The layoff rate held steady at 1.1% for the third straight month. Yet, the “no hire” side of the “no hire, no fire” environment has stymied job switching opportunities and has weighed on workers’ propensity to voluntarily exit current roles. The quit rate dipped to 1.9% in August, back down to its cycle low. (…)

Source: U.S. Department of Labor, Indeed Inc., Conference Board and Wells Fargo Economics

The delicate balance between labor demand and supply has been well proxied by the job opening-to-unemployed ratio, which slipped below 1 in August (0.98 to be specific). With hiring intentions still subdued and retention remaining strong, the pressure on employers to hike wages remains contained. Taken together with solid productivity growth since the pandemic, the labor market is not a significant source of inflationary pressure at present.

Ed Yardeni:

The “jobs-hard-to-get” series is highly correlated with the unemployment rate and suggests that it might have risen in September from August’s 4.3%. However, while the former indicates that the duration of unemployment may be increasing, weekly initial unemployment claims indicates that layoffs remain low.

Taiwan Rejects US Demand for Half of Chips to Be Made in America

(…) “This issue was not discussed in this round of negotiation, and we will not agree to such a condition,” Vice Premier Cheng said.

US Commerce Secretary Howard Lutnick said in a NewsNation interview published this week that the US has held discussions with Taipei about the proposal as a way to reduce the risks of over-reliance on overseas chipmaking. (…)

Brookfield Predicts $7 Trillion of Capital Needed for AI Growth

(…) Brookfield AM is launching a dedicated strategy focused on developing infrastructure for AI. The firm is marrying up its infrastructure, renewables and real estate into one AI strategy to “produce holistic solutions because a lot of these are going to be large industrial investments that we need to make,” Peer Marshall said in an interview with Bloomberg TV on Wednesday. (…)

GDP – AI = 0?

Harvard economist Jason Furman:

Investment in information processing equipment & software is four per cent of GDP. But it was responsible for 92 per cent of GDP growth in the first half of this year. GDP excluding these categories grew at a 0.1 per cent annual rate in the first half.

If so, Tariff Man has been twice lucky with the AI boom and lower oil prices.

The unanswered questions: will AI capex continue, at what pace, and how profitable will it actually be?

Pfizer to cut drug prices in exchange for tariff relief, Trump says

Pfizer and U.S. President Donald Trump on Tuesday said they had cut a deal in which the U.S.-based drugmaker agreed to lower prescription drug prices in the Medicaid program to what it charges in other developed countries in exchange for tariff relief.

Trump also said Pfizer would offer that most-favoured-nation pricing on all new drugs launched in the U.S. and flagged that other drugmakers will follow suit. (…)

U.S. patients currently pay by far the most for prescription medicines, often nearly three times more than in other developed nations, and Trump has been pressuring drugmakers to lower their prices to what patients pay elsewhere.

Pfizer will be part of the White House’s new direct-to-consumer website for Americans to buy drugs, called TrumpRx, that will launch in 2026. (…)

Several drugmakers have already set up direct-to-consumer pricing for some of their drugs, to be listed on a new website from the U.S. lobby group PhRMA, and raised the prices of their therapies in Britain in line with Trump’s desire to offset price decreases in the U.S. (…)

Pfizer is the first drugmaker to announce a deal. Trump sent letters to 17 leading drug companies in July telling them to slash prices to match those paid overseas. He asked them to respond with binding commitments by Sept. 29.

Sources at five large drugmakers told Reuters the Trump-Pfizer announcement caught their companies by surprise and that they watched the White House news conference to gauge its implications.

Pfizer will invest US$70-billion in research and development and domestic manufacturing and received a three-year grace period during which its products will not be subject to the pharmaceutical-targeted tariffs, “as long as, of course, we move the products here,” Bourla said.

Pfizer said a large majority of its primary care treatments and some select specialty brands will be offered at savings that will range as high as 85 per cent and on average 50 per cent. According to a poster on display at the event, those will include rheumatoid arthritis drug Xeljanz, which carries a list price of over US$6,000 a month, migraine treatment Zavzpret, dermatitis drug Eucrisa and post-menopausal osteoporosis medication Duavee.

Drugmakers’ shares rose because the price concessions are limited to Medicaid, said Daniel Barasa, portfolio manager at investment firm Gabelli Funds.

Barasa said the deal was “a highly favourable outcome for the industry. Given that Medicaid already benefits from substantial discounts and rebates – exceeding 80 per cent in certain cases – the incremental impact on manufacturers is relatively minimal.”

New Medicaid prices are also set to launch in 2026, a senior administration official said on a media call. The most-favoured-nation pricing is based on the lowest price paid in eight other wealthy countries after fees and rebates.

More than 70 million people are covered by Medicaid, the state and federal government program for low-income people. But drug spending in the program is dwarfed by that of its sister program Medicare, which covers people aged 65 and older or who have disabilities and is not included in Tuesday’s announcement.

Medicare’s drug spending reached US$216-billion in 2021, while Medicaid’s gross spending was around US$80-billion.

Anna Kaltenboeck, a health economist at Verdant Research, said that if Pfizer and other companies provide supplemental rebates to Medicaid, that could be significant, as it would support states struggling with the cost of specialty drugs.

Medicaid spends less on drugs than other payers, however, so the impact would be less dramatic than if the reductions applied to Medicare, she said.

CHINA PMIs

Manufacturing sector expands at fastest pace in sixmonths

The headline seasonally adjusted Purchasing Managers’ Index™ (PMI) rose to 51.2 in September, up from 50.5 in August. Posting above the 50.0 no-change threshold for a second successive month, the latest figure signalled that manufacturing sector conditions continued to improve. Moreover, the rate of improvement was the joint-quickest since November 2024, having matched that seen in March.

Central to the latest improvement in manufacturing sector conditions was faster growth in new orders. Better underlying demand conditions, promotional efforts and new product launches all supported the latest upturn in overall new business, with the rate of expansion the fastest since February. New export orders meanwhile increased for the first time since March, though the rate of growth was only slight. Rising inflows of new work underpinned the quickest rise in manufacturing production in three months.

In line with higher new orders and production, Chinese manufacturers lifted their purchasing activity in September. The rate of growth was the quickest seen since last November and solid. Subsequently, stocks of purchases also increased, while inventories of finished goods rose due to increased production and manufacturers’ efforts to rebuild stock levels.

Meanwhile, greater amounts of new business also contributed to a further accumulation of backlogged work in September. Notably, the rate of expansion was the quickest seen since May 2024. This led to some firms to raise headcounts, though overall staffing levels declined again as a number of manufacturers expressed concerns over costs.

Average input prices continued to increase at the end of the third quarter. This was despite an improvement in supply conditions, as highlighted by the first reduction in average lead times in seven months on the back of reports of increased product availability and better supplier communication. Panel members indicated that higher prices for metals and meat contributed to the upturn in overall expenses. The rate of input cost inflation was the highest in ten months, but remained below the series average.

In contrast to the trend seen for input costs, average selling prices declined slightly in September after stabilising in August. Strong competition among manufacturers led firms to largely absorb cost increases to support sales, according to anecdotal evidence. While exporters continued to raise their charges to reflect rising input costs, the rate of increase was only fractional in September.

Overall, sentiment regarding the one-year outlook for output across the Chinese manufacturing sector improved in September. Goods producers were the most upbeat since March amid hopes that business development efforts and supportive government policies would help to spur sales and boost production in the year ahead. The level of confidence was below the long-run average, however.

Services activity growth remains solid in September

The headline RatingDog China General Services Business Activity Index fell slightly from 53.0 in August to 52.9 in September. Posting above the 50.0 neutral mark, the latest reading indicated another expansion of services activity in China, thereby extending the current period of growth that began in January 2023. The rate of increase slowed for the first time in three months, but remained solid overall.

Better market conditions, new product launches and supportive government policies were cited as reasons for the expansion in new work in September. The rate at which new business rose was solid, albeit the least pronounced in three months. New export orders also expanded in September, driven by rising tourism activity. While modest, the pace at which exports rose was the most pronounced in seven months.

Despite the solid increases in new business and activity, job shedding persisted in September. Staffing levels declined at the fastest rate since April 2024 amid reports of both resignations and redundancies. Panel members often linked the latter to cost concerns, though reduced capacity pressures played a part as well. Notably, the latest survey signalled a notably slower and only marginal rise in the level of outstanding business.

On prices, average input costs increased for the seventh successive month in September and at a quicker pace compared to August. Service providers attributed the latest increase in costs to both higher wages and greater raw material prices. Rising cost pressures led companies to raise their output charges in September, following a reduction in August. However, rates of both input cost and output price inflation were only marginal.

Finally, business sentiment regarding the one-year outlook for activity remained positive across the service sector in September. Moreover, the level of confidence climbed to the highest since March. Companies often hoped that stronger market conditions and business expansion plans will support sales and activity growth in the year ahead.

The official manufacturing PMI rose to 49.8 in September from 49.4 in August

The subindex for factory production rose to 51.9 from 50.8 in August. New orders rose to 49.7 from 49.5, while new export orders improved to 47.8 from 47.2.

Unlike the official gauge, RatingDog’s PMI is based on about 650 respondents and focuses more on smaller, export-oriented firms. (…)

The official nonmanufacturing PMI, which covers service and construction, declined to 50.0 in September from 50.3 in August.

The services subindex fell to 50.1 in September from 50.5, while construction edged up to 49.3 from 49.1. (…)

@MacroMicroMe

Weak Japan Data Poses Headache for Central Bank Industrial production dropped 1.2% in August from the previous month, declining again after a fall in July

(…) Moody’s Analytics economist Stefan Angrick estimates that U.S. duties on Japanese exports will shave at least 0.5% off the nation’s gross domestic product.

“Japan can’t bank on domestic demand to make up for the deteriorating export outlook. Sticky inflation is still eating into wage gains, keeping consumer spending weak,” Angrick said.

Separate government data showed that retail sales slipped 1.1% in August from a year earlier, marking the first decline since February 2022. (…)

Tariffs, Uncertainty to Slow Asia’s Economic Growth, ADB Says Front-loading of exports to get ahead of U.S. tariffs boosted growth in Asia in the first six months of the year

Asia’s economies grew at a solid pace in the first half of the year, but that momentum will slow as tariffs take effect, the Asian Development Bank said as it cut growth forecasts for the region.

U.S. tariffs have settled at historically high rates and trade uncertainty remains at record levels, said Albert Park, chief economist at the Philippines-based multilateral bank.

“The impact is increasingly shaping the outlook for developing Asia and the Pacific,” he said in the bank’s September outlook released Tuesday.

Front-loading of exports to get ahead of U.S. tariffs boosted growth in Asia in the first six months of the year, with tech powerhouses like Taiwan and South Korea also cashing in on booming artificial-intelligence demand. But as U.S. policy reshapes global trade, the region will take an economic hit, even as fiscal and monetary policymakers move to cushion the impact.

ADB now sees gross domestic product growth for developing Asia—a grouping of 46 of its members including China, India and South Korea—at 4.8% this year. That is down from April’s 4.9% forecast and the 5.1% expansion recorded in 2024.

It expects growth to slow further to 4.5% next year, versus the 4.7% projected in April.

U.S. tariffs have hit developing Asia, especially China, harder than the rest of the world. Accounting for exemptions and sector-specific duties, the region now faces an average effective tariff rate 28.1 percentage points higher than those agreed through the World Trade Organization or free-trade agreements—well above the average excess tariff the U.S. imposes on imports from outside Asia, ADB said.

India faces the steepest tariff hikes in the region, prompting the bank to downgrade its growth outlook for fiscal 2025 to 6.5% from 6.7%.

South Korea too is vulnerable, particularly to the U.S.’s sector-specific levies, including on cars and auto parts, which account for about a third of its U.S.-bound shipments, the report said. ADB cut its 2025 growth forecast for South Korea to 0.8% from 1.5%.

Despite also being a major tariff target, China’s growth forecast was left at 4.7% for this year. Citing “cautious optimism” amid a prolonged property-sector slump and trade turmoil, the ADB said it expects targeted government policy to help offset headwinds and sustain domestic economic activity. (…)

Rise of ‘Accidental Landlords’ Is Bad News for Investors Who Bet Big on Rentals Problems in the for-sale housing market are starting to infect the rental business

Big corporate landlords have unwelcome new competition. Regular homeowners who can’t sell their properties are renting them out instead, and the growing number of “accidental landlords” is a headache for pros.

Rents in the top 20 U.S. markets for single-family homes are expected to rise 0.8% this year, according to John Burns Research & Consulting. That would be the slowest pace since 2011, when job losses caused by the global financial crisis made it hard to increase rent. (…)

As more homes are put up for sale, owners are finding that demand isn’t there at the prices they expected. Of the 3.06 million properties listed at the start of this summer, only 28% sold, based on data from housing analytics firm Parcl Labs. That leaves 1.96 million homes left on the market going into the fall, a fifth higher than this time last year.

Realistic sellers will cut the price. Others are either delisting their properties to wait for market conditions to improve, or becoming accidental landlords: 2.3% of the homes that were for sale this summer ultimately switched to rentals. The share is higher in certain Sunbelt cities where conversions to rentals topped 5%. (…)

Invitation Homes, one of the largest single-family housing landlords in the U.S., reported falling rents for new leases in several cities in Texas and Florida this year including Tampa, Orlando, Jacksonville and Dallas. These are some of the most oversupplied housing markets in the country. (…)

Invitation Homes and American Homes 4 Rent are still seeing healthy rent growth in the Midwest and parts of the West Coast. They are also charging their existing tenants more nationwide to offset falling rents for new move-ins. For example, Invitation Homes raised the rent 6.2% for in-place tenants in South Florida this year, while new residents got a 0.2% price cut. (…)

Meanwhile, the number of home transactions has fallen to levels not seen since the 1990s, and the “shadow inventory” of unsold homes is building in the rental market, along with delistings. (…)

CPI-Rent was up 3.5% YoY in August, in constant deceleration since its pandemic peak growth rate of 8.8% in April 2023. The monthly measure rose 0.34% in August, likely a statistical aberration considering that the Zillow Rent Index was unchanged (+0.03%) after +0.12% in July. Zillow is now up 2.4% YoY, slightly lower than the BLS All-Rent Index (+2.8%).

Services inflation could surprise on the downside finally.

Let’s hope so because this chart is scary:

(Apollo)

Not scary enough? From the real world as of Sept. 8:

Harvard University researchers are tracking the impact of tariffs on consumer prices using a novel integration of high-frequency retail pricing data, product-level country-of-origin information, and detailed tariff classifications.

By linking daily prices from major U.S. retailers to Harmonized System (HS) codes and import origins, we construct custom price indices that isolate the direct effects of tariff changes across product categories and trading partners. Our analysis reveals rapid pricing responses, though their magnitude remains modest relative to the announced tariff rates and varies by country of origin.

Both imported and domestic goods are affected, suggesting broader pricing and supply chain spillovers.

Figure 1 compares the price index of goods produced in the United States with those manufactured abroad,from October 1, 2024 to September 8, 2025. The vertical lines denote major tariff news or events. (…)

The 2025 tariffs first became binding on February 4, at a rate of 10% on Chinese goods, but had little immediate effect on retail prices.2 This changed on March 4—marked by the first dashed vertical line in the figure—when the U.S. imposed 25% tariffs on imports from Canada and Mexico, along with an additional 10% tariff on Chinese goods. Immediately afterward, the prices of imported goods increased by approximately 2 percentage points, while domestic goods prices rose by roughly half as much.

After “Liberation Day” on April 2, the rate of price growth for imported goods again accelerated, coinciding with the announcement of a baseline 10% tariff on goods from all countries. For Chinese goods, the tariff was raised to 125% on April 10 as trade tensions between the two countries escalated. Domestic goods prices also increased during this period, but at a significantly slower pace.

Prices responded again after May 12, when the US temporarily reduced the additional tariffs on Chinese goods to 10 percent for a 90-day period. Following the announcement, prices declined modestly across all goods, but the drop was short-lived. By early June, both imported and domestic goods appeared to return to their previous trends, before falling again toward the end of the month. Then, on July 7, trade tensions escalated as the US issued letters to several
countries announcing a new deadline for higher tariffs on August 1. Shortly thereafter, prices began to rise once more. (…)

Since early March, prices have increased by approximately 4 percent for imported goods and 2 percent for domestic goods.

(…) the price increases observed for domestic goods suggest that tariffs have broader effects beyond directly targeted imports. Many U.S.-made products rely on imported inputs—such as components, packaging, or raw materials—from tariffed countries.

Even when final assembly occurs domestically, firms may raise prices to reflect rising input costs. In addition, as tariffs make imported goods more expensive, firms may anticipate a shift in demand toward domestic substitutes. Expecting this substitution, they may increase prices on U.S.-made goods, especially in categories where domestic and foreign products are close substitutes

By Country of Origin

Trump Sets Lumber, Wood Tariffs in Bid to Boost US Industry

President Donald Trump ordered 10% tariffs on imports of softwood timber and lumber, as well as 25% levies on kitchen cabinets, vanities and upholstered wood products, marking his latest bid to use import taxes to shore up domestic manufacturing.

The tariffs are set to apply from Oct. 14, with some increases targeted to take effect Jan. 1, according to a proclamation signed Monday. They follow a Commerce Department investigation into imports of lumber, timber and derivative projects that was launched in March.

Yet home builders have warned they also could deter investments in new houses and renovations.

Canada stands to be hit hard by the order, as it’s by far the US’s largest wood supplier and it’s already subject to 35.2% duties meant to counter alleged subsidies and unfair pricing. And while Trump has claimed the US doesn’t need Canadian lumber, Canadian supplies make up about a fifth of the US market. (…)

“Our housing crisis is a bigger threat to national security than imported lumber or timber,” the National Association of Home Builders told the government earlier this year. With most lumber and timber imported from longtime allies such as Canada, Germany, Sweden and Brazil — and lumber itself a renewable resource that doesn’t play a major role in modern warfare — “the threat to national security comes from our nation’s housing crisis, not imported lumber.”

Even so, Trump was under pressure from some congressional Republicans to use tariffs on furniture, cabinets and other wood products to boost their home-state industries, with some encouraging levies as high as 100%. And Trump has signaled his sympathy for furniture makers in North Carolina — once part of an acclaimed southern US hub for the domestic industry — where manufacturers say they are increasingly competing against subsidized, foreign rivals. (…)

The home furnishings sector has already been in a recession for years, and tariffs targeting timber and wood “would put it on its knees,” Dovetail Furniture and Designs, a furniture retailer based in California, warned the Commerce Department earlier this year.

Furniture for America, a coalition of companies spearheaded by the American Home Furnishings Alliance, said new duties on wood products would shrink the US workforce, since American furniture companies are reliant on a complex global supply chain that’s evolved over a quarter century — and not easily replaced domestically.

“Tariffs cannot unravel and reverse the global trends that shaped the home furnishings industry over those two and a half decades,” the group said in comments filed with the Commerce Department. “Tariffs cannot reopen factories that no longer exist, bring back thousands of workers who retired or moved on to other industries, nor reverse the interests and inclinations of today’s younger workers, who are attracted to higher-paying trades and the burgeoning tech industry.”

But what do they know? Certainly not politics!

Here’s what Americans know:

The annual income needed to afford the median-priced home, assuming a 31% housing debt-to-income ratio and a 30-year mortgage with a 3.5% downpayment, reached $126,700 last year per a June analysis from the Joint Center for Housing Studies of Harvard University, up from less than $80,000 in 2021. 

Meanwhile, single family and apartment affordability now lag their respective historical averages in 99% of the 580 national regions surveyed by ATTOM, the property data firm relayed Friday. Housing related expenses consume 33.3% of the typical American wages, up from 32.2% at this time last year. (ADG)

There’s more from Bloomberg:

Trump posted on social media Monday that he would be “imposing substantial Tariffs on any Country that does not make its furniture in the United States.” It’s unclear how that would work; companies, not countries, manufacture furniture and the duties are charged on specific imports, not governments.

“Details to follow!!” the president wrote. Trump said he would act “in order to make North Carolina, which has completely lost its furniture business to China, and other Countries, GREAT again.”

In a separate post, Trump reiterated his threat to impose a 100% tariff “on any and all movies that are made outside of the United States.”

“Our movie making business has been stolen from the United States of America, by other Countries, just like stealing ‘candy from a baby.’ California, with its weak and incompetent Governor, has been particularly hard hit!” Trump posted, offering no further details. (…)

It’s not clear how such a tariff would work, nor how films would be valued for duty-collection purposes. Many films from Hollywood studios involve global production, shooting on multiple locations foreign and domestic and involving post-production work that could be done anywhere.

Details! Pfft!

• US opens tariff probes into medical equipment, robotics, industrial machinery

Anything else?

Yesterday, discussing recent consumer data, I raised the possibility that slowing labor income growth (black below) could pull spending growth down to the 4.5% range which, with inflation close to 3.0%, could slash spending growth by nearly half to the 1.5% range.

Apollo tracks daily data for debit card transactions. The trend in the 28-day sum through last week has indeed declined by 50%.

Polymarket Puts Government Shutdown Chances Above 80%

How Much Does a Shutdown Impact the Economy?

0.4%

That’s how much a 34-day partial government shutdown reduced annualized real economic growth in the first quarter of 2019, the Congressional Budget Office estimated.

A full shutdown could more closely mirror the effects of the 16-day 2013 funding lapse, which lowered annualized growth by as much as 0.6%, the Office of Management and Budget said.

Economists say the economy generally makes up for any lost growth once the government reopens.

But threats of mass federal layoffs could leave a more lasting mark by making furloughed employees nervous to spend and, potentially, reducing employment.

• What a US Government Shutdown Means for Markets

The dollar is likely to weaken further in a shutdown, if history is any guide. During the three most recent episodes — in 2013, early 2018 and late 2018 into 2019 — the Bloomberg Dollar Spot Index drifted lower both during the impasse and in the immediate aftermath. The 35-day closure from December 2018 delivered the most pronounced bout of dollar weakness, underlining how the impact worsens with duration. (…)

Over in the bond market, Citigroup is out with a note pointing out that prolonged government shutdowns have historically lifted prices for long-dated Treasuries.

The most notable was in 2018 — a work stoppage that stretched more than a month — when yields on 10-year notes tumbled nearly half a percentage point. Back then, rates began to move lower ahead of time as concern grew the shutdown would spark a recession. As it stands now, Treasuries are wrapping up September with a third straight quarter of gains.

As for equities, data from Truist Advisory Services shows that over the course of the last 20 government closures dating back to 1976, the S&P 500 barely moved.

Even extended government shutdowns seem to have little, if any, negative effect on stocks. The S&P 500 dropped 2.3% during the 16-day closure in 2013, while the US stocks gauge actually rallied over 10% during the 34-day shutdown from December 2018 to January 2019, according to data compiled by Bloomberg.