China Is Teetering On A Recession

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here

China Teetering On Recession

On Friday, China’s National Bureau of Statistics announced that the official PMI for June rose slightly to 49 in June, up from 48.8 in May. Since any reading under 50 signals a contraction, China’s manufacturing sector is in a recession.

One big alarm is that the new export orders component declined to a 5-month low of 46.4 in June. The service sector PMI for June declined to 52.8, down from 53.8 in May. Finally, home sales for the top 100 Chinese property developers declines 28.1% by value in June. I think is it safe to say that China may have negative GDP growth in the second quarter.

China is teetering on a recession and you think that would hurt energy prices because demand for oil in China might go down, but energy prices are very firm now because demand is very robust in the United States.

Strong Energy

The other thing about the U.S. is our inventories are at a five-year low for crude oil. Furthermore, inventory of refined products is very low so refiners are going to make a lot of money. We got a lot of strength in the energy patch.

The Fed announced on Friday that consumer spending decelerated in May to a 0,1% increase, down from a robust 0.6% increase in April. The Personal Consumption Expenditure (PCE) index rose only 0.1% in May and has risen 3.8% in the past 12 months. The core PCE, excluding food and energy, rose 0.3% in May and 4.6% in the past 12 months.  

Despite an improving PCE, a bigger drop is anticipated in June and hopefully, that big drop will convince the Federal Open Market Committee (FOMC) to continue to pause any further key interest rate hikes.

The bottom line is the U.S. is the oasis as you look around the world. Europe is in a recession while China is teetering on a recession.

Self-Inflicted Inflation

What’s so sad about Europe is a lot of the inflation is self-inflicted from the green energy policies. There’s nothing wrong with green energy, it’s just more expensive than other energy, and their inflation data is not adjusted for that. Whether this is right or wrong, it’s just what they are doing to themselves. Green energy is expensive in the U.S. too, but it’s not quite as bad as it is in Europe.

New York City’s Department of Environmental Protection (DEP) has drafted new rules that would order restaurants to reduce their carbon emissions by 75%. This would require restaurant owners to buy expensive emission control devices on their pizza ovens, which also require expensive maintenance.

DEP Spokesman, Ted Timbers, said “All New Yorkers deserve to breathe healthy air, and wood and coal-fired stoves are among the largest contributors of harmful pollutants in neighborhoods with poor air quality.”

This brewing DEP war against iconic Italian restaurants and pizza joints in New York City is not going over well. Since New York Mayor Eric Adams on Earth Day (April 17th) asked New York City residents to eat less meat and dairy to reduce carbon emissions, I suspect that Italian restaurants and pizza joints will not get any symphony from City Hall. As a result, I am predicting that the next New York City mayor will be a pizza-loving Italian.

Coffee Beans: Octopus’s Garden

One in four Americans say it’s morally unacceptable to eat an octopus. Commonly eaten animals in the U.S., such as salmon, chicken, and cows were seen as acceptable to eat by the vast majority. Source: Statista. See the full story here.