Adding to the shocking downward job growth revisions on Friday-as sent crypto prices that tumbled-are the ISM services PMI suddenly begin to consistently indicate softer than economic activity.
The ISM services for July entered 50.1, which is significantly lower than the expected 51.5. A number above 50 indicates economic expansion and below this level contraction.
The soft printing is remarkable as it is now a three-month weakness pattern where May’s number has been 49.9 and June’s 50.8-a significant slowdown from previous months.
Connection of this sign of economic weakness was a stagflationary signal embedded in the report, the prices paid for Subindex, which shot up to a cyclushøj of 69.9.
“Tariffs cause extra costs as we continue to buy equipment and supplies … The costs are significant enough for us to postpone other projects to meet these cost changes,” read a comment from the report.
Neither crypto nor traditional markets kindly took to the Tuesday data, with Bitcoin (BTC) withdrew from over $ 114,000 to $ 112,800, lower by almost 2% over the last 24 hours. Nasdaq turned from previous gains to a 0.5% loss.
Fat cut now?
“The data always suffers great revisions when the economy is at a bending point, like a recession,” wrote economist Mark Zandi after the big downward job revisions on Friday.
“The economy is at the bottom of the recession,” he continued. “Consumer costs have flat, construction and manufacture contracting, and employment is set to fall. With inflation is increasing, it’s hard too fat to get to rescue.”
Long leaders at Hoisington Investment Management, Lacy Hunt and Van Hoisington are not so sure that Fed can wait. Calling inflation gains from the tariffs temporary and a first round effect, hunting and Hoisington says the second, third and later round contraction effects are of far more import.
“Fed must move to a welcoming policy quickly,” they concluded. “Fed will be poorly advised to wait … The far more critical consideration is the upcoming contraction in global economic activity.”
