PMIs and Consumers are Soft
This week, we noticed manufacturing data that has caused a change in our thinking. First, Purchasing Managers Indices (“PMI”) were released for manufacturing companies around the world and second, there were a number of consumer companies in the US that reported results and we were able to review management’s commentary. On the manufacturing side, the PMI surveys present management intentions for manufacturing companies. The data has deteriorated over this past month. On the consumer side, we noticed general commentary from companies in the US that indicates that the consumer is slowing as well.
- In Figure 1, we present PMI data from around the world which indicates that the manufacturing outlook for most of the large economies in the world (other than India) are in contraction mode (i.e. below 50). This would indicate that there is growing weakness in the global economy.
- We also note the following commentary below from selected management conference calls:
“Economic conditions softened across several TransUnion markets in the third quarter…. lingering inflation and rising borrowing costs have taken a toll on household finances.” TransUnion ($TRU ) CEO Christopher Cartwright
“The consumer is clearly under pressure with inflation over the past year and pretty much everything with gas and groceries and really across the board, higher interest rates.” Chipotle Mexican Grill ($CMG ) CFO John Hartung
“But I think with where we are in consumer health, we are seeing a more stressed consumer.” – Harley Davidson ($HOG ) CFO Jonathan Root
“This means that” recently the US Fed has made commentary with respect to high interest rates and tightening financial conditions. PMI data clearly indicates a slowing manufacturing trend. It is also clear that, anecdotally, companies are seeing weakness in the US consumer. We can conclude that the global economy is slowing. If central banks can manage to ease financial conditions into the weakness, then there is a potential for a soft landing. This would ultimately be very positive for risk assets. We will watch for easing over the coming months.
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Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Real Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
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