New York Factory Activity Contracts on Weak Orders, Shipments
The Federal Reserve Bank of New York’s general business conditions index decreased nearly 21 points to -8.7, figures issued Monday showed. Readings below zero indicate contraction, and the figure was lower than all estimates in a Bloomberg survey of economists.
The measures of current new orders as well as shipments both dropped to the worst readings since April 2024. (…)
Meanwhile, gauges of prices paid for materials as well as those received by state manufacturers edged down somewhat but were still elevated, according to the Monday report.
A gauge of factory employment contracted for the first time since May and a measure of hours worked also fell.
The six-month outlook index for overall activity in New York state looks somewhat more positive than current conditions, but “optimism remains subdued,” according to the statement.
CONSUMER WATCH
So far, so good from The Transcript:
- “The consumer has been resilient. We are pleased with second quarter results and momentum has continued third quarter to date.” – Macy’s ($M ) EVP Thomas Edwards
- “I would tell you that, like in general, members are pretty rational. The consumer behavior is pretty consistent. And so far, the impact from tariffs has been fairly muted.” – Walmart Sam’s Club U.S. ($WMT ) CEO Christopher Nicholas
- “Consumer remains really strong. We saw record spending, I think, this quarter across both our debit and credit cards.” – The PNC Financial Services Group ($PNC ) CEO William Demchak
- “Consumer spending continues to be healthy. This is very consistent with what I shared at our second quarter earnings call…the consumer continues to spend at a healthy clip.” – Mastercard ($MA ) CFO Sachin Mehra
- “The requisite, how is spending going question. The word that comes to mind is strong. There’s obviously a lot of uncertainty and sentiment out there. But when we stare at the data, we look at what the consumer is actually doing within our network, we see continued strong performance.” – Visa ($V ) Chief Product & Strategy Officer Jack Forestell
But… from McKinsey:
Every quarter, we ask US consumers how they feel about the economy and how those sentiments influence their spending. As inflation and rising costs1 continue to weigh on households, we conducted a targeted survey to understand how consumers are planning for the holiday season ahead.
Our findings reveal that many shoppers are approaching the holidays with caution and practicality, adjusting their budgets and habits accordingly. Many consumers plan to scale back on discretionary and semi-discretionary purchases, a shift that has prompted some to begin their holiday shopping earlier than usual with a stronger focus on essentials. (…)
Consumer say they plan to prioritize essentials over the next three months, with net intent remaining positive across most necessity-driven categories. However, this trend shifts when it comes to semi-discretionary items, where spending intent shows noticeable cuts, and net intent turns negative across many categories. [toys, vehicles and beauty products]
The most striking development is the sharp decline in discretionary spending intentions. Although higher-income consumers are somewhat less affected by this pullback, this trend is observed across all income groups. This underscores a broader, cautious approach to spending as economic pressures continue to shape consumer behavior.
Nearly half (46 percent) of US consumers plan to keep their holiday spending in line with last year’s levels, while roughly one in four intend to spend less. This share is significantly lower than in many European countries, where a greater proportion of shoppers intend to maintain their holiday budgets.
From Bank of America deposit data:
The labor market slowdown appears to be impacting lower-income households, in particular. According to Bank of America deposit data, after-tax wage and salary growth slipped to just 0.9% year-over-year (YoY) for lower-income households in August — the smallest gain since the start of the series in 2016.
Wage growth for higher-income households, on the other hand, rose to 3.6% YoY, the highest growth rate since November 2021. This growing divergence between income cohorts is also reflected in spending trends, with credit and debit card spending growth easing for lower-income households but accelerating for higher-income ones.”
But… from JPM Asset Management via ADG:
David Kelly, chief global strategist at JPMorgan Asset Management, relayed on Aug. 25, the Internal Revenue Service has opted not to amend the W2 or 1099 forms for the current calendar year in response to the recently passed One Big Beautiful Bill Act. The law features array of tax cuts backdated to take effect on Jan. 1 of this year even as withholding schedules have remain unchanged.
Accordingly, “we will see an even larger crop of personal income tax refunds in early 2026 than was anticipated when the OBBBA was passed,” Kelly pointed out, estimating that the country’s 104 million taxpayers will see reimbursement of nearly $3,300 on average.“These higher income tax refunds should work much like a new round of stimulus checks, adding to consumer demand and inflation pressures early next year.”
Equating those givebacks with sugar rather than nourishing protein, Kelly added thus: “when their effects fade, it is quite possible that Washington will provide yet another round of stimulus to boost demand ahead of the mid-term elections. For investors, this underscores the limited potential for a sustained decline in long-term interest rates.”
TARRIF TALES
- Shoe Companies Warn of Price Increases as Tariff Costs Kick In An industry trade group says companies are beginning to pass along the cost of tariffs to customers
Matt Priest, chief executive of Footwear Distributors and Retailers of America, an industry trade group, said companies are beginning to pass along the cost of tariffs paid on recent shipments.
“Women’s shoes are more fashion-oriented,” Priest said during a call with reporters on Monday. “Our ability to front-load women’s product based on fashion trends was limited, and we are seeing that those increases start to hit consumers first.”
Many U.S. companies rushed in extra inventory ahead of the Trump administration’s new tariffs as a hedge against the increased costs. But now, months later, those inventories are beginning to dwindle, leaving companies on the hook for hefty tariffs of as much as 50% or more on shipments of new goods.
Priest said that his group’s approximately 500 members typically pay about $3 billion in tariffs each year in total, and that is on track to grow to about $5 billion for this year. (…)
Mooney said costs at his company, which makes shoes in countries including China, Mexico, India and Indonesia, are up about 15% to 20% on average for like items this year. Footwear Unlimited so far has largely shared the costs with its factories. Mooney said the company is also raising some wholesale prices about 5% to 10% on average due to tariffs. (…)
- A Tariff Lesson for Coffee Drinkers A case study in how border taxes raise the daily cost of living.
This summer Mr. Trump hit Brazil with a 50% tariff because he said the country is prosecuting his friend, Jair Bolsonaro. One problem for Americans is that Brazil is the world’s biggest coffee producer, and its beans are in more than one of every three cups of joe brewed in the U.S. Every American coffee drinker either is paying more or soon will as a result.
The price of a pound of unroasted Brazilian beans has jumped to more than $6 from $4.50, says Dan Hunnewell, the owner of Coffee Bros., a specialty supplier in New York. He’s trying to keep his own prices steady “as long as possible,” he adds. “I will even eat some of the difference.” But if the 50% tariffs on Brazil continue, he expects to raise prices “pretty significantly” or buy beans from elsewhere, even if it changes the taste profile. (…)
“Our importers are talking about 10% to 20% increases on the bags that we’re purchasing now—but they’re also telling us it could be as high as 40% to 50%, depending on the coffee they’re buying and the tariffs,” Ms. Booker says. (…)
Bruce Prangley ordered a $77 shirt in August from a Swedish sports brand. He paid $30 for shipping. Then, two weeks after the package was delivered, he received an unexpected bill from FedEx for $42.35.
The surprise bill was a tariff charge.
It was the result of a rule change by the Trump administration, making all e-commerce packages entering the U.S. subject to tariffs. Packages worth $800 or less previously had been exempt from duties. The change is catching some shoppers unawares. (…)
Anthony DeSousa, a pizza shop owner in Estes Park, Colo., was expecting his annual shipment of oven replacement parts from Canada this month. They were worth around $640. Before delivery, he received an email from UPS, saying that he owed “government charges” of $1,196.12 and “brokerage charges” of $128.17. The bill didn’t break down how the tariffs were calculated. (…)
“Imagine you order a $20 pizza and you get an additional $57 tariff bill upon delivery because of duties on the prosciutto di Parma from Italy and the bell peppers from Peru.” (…)
Donald Trump tilts balance of power from investors to CEOs President’s call to scrap quarterly reports comes as SEC considers curbing shareholder lawsuits
Donald Trump’s administration was shifting the balance of power from shareholders to company bosses even before the president on Monday called for quarterly earnings statements to be ditched.
In a little-noticed announcement last week, the Securities and Exchange Commission said it would consider ways for companies to limit the risk of shareholder lawsuits, paving the way for disputes to be heard privately rather than in the spotlight of the court system.
Days later, the president called for the SEC to drop rules that have been in place for decades that require most public US companies to disclose their financials once every three months. The proposals come on top of an SEC decision on Monday that handed oil major ExxonMobil a powerful new tool to harvest shareholder votes in favour of management, limiting the power of activist investors.
The moves, part of Trump’s broad agenda to slash regulations, could reduce transparency and erode the advantages that have helped draw investors into the world’s biggest and deepest capital markets, according to some shareholder advocates.
John Coffee, professor at Columbia Law School, said: “The US has long been known for its lower cost of capital, and I think that is down to its higher level of transparency and the ability of shareholders to go to court for remedies.”
The SEC on Wednesday will consider whether to allow companies to go public if their articles of incorporation include mandatory arbitration of securities law claims, according to an agenda posted on the regulator’s website last week. That could move disputes out of the courtroom.
The SEC also this month posted a “unified agenda of regulatory and deregulatory actions” that it plans to pursue which include reforms of the rules for shareholder proposals, designed to “reduce compliance burdens” for companies, and a “rationalisation of disclosure practices”.
Amanda Fischer, policy director at Better Markets, said: “Decades of shareholder rights are under threat due to a multipronged legal and regulatory assault driven by corporate management and their champions in the White House and at the SEC.” “The administration is more focused on protecting corporate management than empowering the actual owners of corporations — shareholders,” said Fischer, a former chief of staff to Gary Gensler, who chaired the SEC under Joe Biden’s administration. (…)
The SEC told the FT it would prioritise consideration of Trump’s plan to reduce the frequency of corporate earnings statements from every three months to every six — an idea the president had also floated during his first term. “At President Trump’s request, chairman Atkins and the SEC is prioritising this proposal to further eliminate unnecessary regulatory burdens on companies,” a spokesperson said.
The president sparked a lively debate with his proposal, which he said “will save money and allow managers to focus on properly running their companies”. Some prominent investors disagreed, as did the leading group representing institutional shareholders. “It’s fair to criticise investors for their short-termism,” said Carson Block, head of Muddy Waters, the prominent short seller. “However, reducing reporting frequency diminishes transparency any way you cut it.” (…)
But Rob Arnott, founder of asset management group Research Affiliates, said he backed the president’s desire to foster longer-term thinking at public companies. “Having to file so many reports is unhelpful, particularly for small companies,” he said. “One concern may be that investors miss out on red flags. Pardon me, but a lot of people miss out on red flags even with quarterly reports.”
Republican moves to roll back disclosure rules are not limited to the Trump administration. In the House of Representatives, the appropriations committee proposed withholding funding for the US accounting standards setter unless it withdraws rules requiring businesses to reveal how much they pay in tax in specific countries. (…)
Bloomberg’s piece, in spite of its headline, includes pros and cons: Wall Street Raises Alarm on Trump Ending Quarterly Earnings
The pros say it would reduce costs and allow management to focus on the business rather that be pressured to hit short-term targets distorting business decisions.
The cons say less transparency would increase risk premiums and the cost of capital.
I side with the cons. Good managers will always focus on the mid-long term. The cost aspect is a red herring given how profitable companies are. “When it comes to investing, more information at higher frequencies always beats less information at lower frequencies.”
FYI
President Trump announced on Truth Social, at 11:45 p.m. ET, “the Great Honor of bringing a $15 Billion Dollar Defamation and Libel Lawsuit against The New York Times, one of the worst and most degenerate newspapers in the History of our Country.”
Reuters says the suit cites The Times’ endorsement of Vice President Harris in the 2024 election, which called him “unfit,” plus “Lucky Loser,” a 2024 book about him by Times reporters Susanne Craig and Russ Buettner, who won a Pulitzer in 2019 for coverage of Trump family finances. (Axios)
BTW, if you missed yesterday’s post with a section “Will the Rally Continue?” with a discussion about AI and energy, you also missed the link to an amazing video Constantin, a long time and generous reader sent me on clone robotics: https://www.youtube.com/watch?v=E1theCfcFsA
Here’s another one on a mind blowing advancement David found: https://x.com/alterego_io/status/1965113585299849535