About a year ago, we discussed a “roadmap to a recession” and the market’s premature expectations of a near-term recession heading into 2025. We also identified what appeared to be a resurgence in inflation and manufacturing momentum last spring as misleading, since credit growth did not sufficiently support a recovery in the most cyclical sectors of the economy.

In the early part of the year, we were somewhat concerned about the building momentum, but we now observe definite signs of a downturn, particularly in China.

Consequently, we are more convinced than ever that the manufacturing recovery and inventory accumulation in the first half of 2024 were deceptive.

Reflecting on the export and activity data from China, there was a significant deceptive increase in export and manufacturing momentum prior to the tariffs. We have now moved past this phase of anticipatory buildup, and both metrics are quickly declining.

China has abruptly slowed down, signaling a potentially troubling outlook for manufacturing. For more see here!