Since the government isn't publishing any data, I decided to create a composite index of what time series we do have from the private sector. It is composed of the whole economy ISM and PMI indices, the University of Michigan's consumer sentiment index, the logistics managers' index, ADP job changes and Challenger job losses (inverted).
The pattern is familiar--I've talked about it before. A nascent recovery through 2024 in response to rate cuts stops dead in its tracks when Trump starts his tariff follies, then rallies a little because the tariff effects are lagged, but starts declining again as tariffs (and deportations and welfare cuts and healthcare) really start to bite.
This indicator suggests that, at best, the economy is somewhat worse this year than last. But if current trends continue, it will be substantially weaker over the next few months, year on year.
Can Fed rate cuts help? Yes, eventually. But economies lag changes in interest rates by 12 to 18 months. Current rate cuts won't undo the damage caused by Trump's policies until late 2026.
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