Manufacturing Survey, Retail Sales, Jobs, Rates, AI, Headlines, and Shameless Plugs
The Numbers…
The Empire State Manufacturing Survey came out, and East Coast manufacturers are still showing expansion, albeit at a decreasing rate.
The general business conditions number was 7.6, with the previous month at 20.6.
Anything above zero is expansion, and anything under is contraction.
So, the expansion is still there, just with not as many businesses.
Orders were still rising, but shipments went slightly negative, and backlogs and delivery times lengthened.
The Retail Sales number… increased. Last month it dropped by 0.5%, and this month it was up 1.2%. Last month the “consumer was clearly being more cautious, but this month, the numbers were surprisingly strong”.
Don’t worry; next month we’ll all be cautious again.
Weekly new jobless claims came in at 196,000. Again, below average and below expectations of 207,000, so the labor market is still showing strength.
See FOMC piece below.
The Federal Open Market Committee – FOMC…
…raised the federal funds rate by ¼ percentage point to between 3.75% and 4.00%. The statement released on Wednesday by the FOMC stated, in part:
Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal. The Committee will deliver price stability.
The Committee was unanimous in its agreement to this statement.
They not only raised rates, but the implication was also that they would continue to do so until inflation indicates it is getting closer to 2%.
It turns out, Kalshi was a good predictor.
By the end of this year:
2 members did not see any further rate changes.
12 members saw a rate increase of another 0.25%.
4 members saw a rate increase of 0.50%.
And there is your forecast. While it doesn’t break out opinions between voting and non-voting members, 16 members currently see a need to raise rates by at least another 0.25% by the end of this year.
Bake that into your 2027 budget.
AI
It’s odd, really, how five years ago the two letters, A and I, put together meant either Action Item, Active Ingredient, or any number of things.
Now, Google “ai is…”, and you get the following:
…bad
…bad for the environment
…outsmarting its creators
…dangerous
…taking over
You get the point.
The speed with which attitude about AI has shifted is remarkable. Two weeks ago, it was going to cure cancer, but now it appears we need to get our affairs in order.
It also seems odd how the top AI companies suddenly feel the need for regulation.
Well, I guess you need to protect the public from unknown upstarts that have no idea what they are doing, and might take away from the value of the existing AI companies that also have no idea what they are doing.
I digress.
End of an Era
Warren Buffett stepped down as chairman of Berkshire Hathaway.
That title will now go to his son, Howard. Why? Because Warren said so.
His friends call him Howie, and he is 71 years old.
Normally, you might retire at that age, but his dad is 96, so I’m guessing he’s looking at 20 years.
Headlines
Southwest to Offer Airport Lounges – Hmm. Will they be offering jumbo bags of peanuts, along with whole cans of Coke? What does that look like?
Goldman Warns of $120 Oil – Well, that is about 20% higher than Friday; probably should plug that into your 2027 budget just in case.
LIV Golf Files for Bankruptcy – Reader survey: does anyone care? Next…
Bond Yield Nears 5% as Selloff Shows No Sign of Diminishing – Last week it passed 5%, for the second time since the Great Recession. And…?
Well, as assets like U.S. Treasuries increase in yield, it pulls money out of the stock market. Why buy AT&T with a 4.19% dividend yield when you can buy a super-safe Treasury for 5%?.
Assuming you think it’s super safe.
Boomers Join Parents in Retirement Villages – That’s how long people are living. The 70-year-old boomers are living with their 95-year-old parents in the same senior community. OMG.
New Products Spur Record Lego Sales – Well, the only difference between men and boys is the price of the toys. Evidently they are targeting both; have you seen how much some of those Legos cost? No wonder Lego consumer sales increased 22% over the last six months.
A couple of shameless plugs…
An excellent business contact and friend, Jon Fehrman, is part of Advanced Office Solutions. They are having an open house in their Irvine offices on October 1, with various speakers. One in particular is absolutely fascinating to listen to: Oli Thordarson, the CEO of Alvaka, whom I heard speak a few years ago about cybersecurity and ransomware. I highly recommend attending. Click here to learn more.
Secondly, Carol Marzouk, an executive coach and all-around solver of company personality challenges, had a great phrase in her weekly email:
Silence teaches people what’s OK.
This goes back to my letter of last week. Inspect what you expect, because if someone isn’t performing or doing what they should be doing and you say or do nothing to correct it, you are telling your employee it’s OK. Just keep doing that, and we won’t do anything about it.
That is a lose-lose proposition.
Go forth, and inspect what you expect.
