The last 24 hours have been rough for economic data both in the US and around the world as most indicators released have been weaker than expected.  It started with weaker-than-expected PMI readings for the services sector in China but has since spread to weaker PMI readings for most major economies in the Eurozone as well.  Here in the US, PMI data on the services sector will not be forthcoming until tomorrow morning, but Factory Orders released this morning were a big miss.  At the headline level, orders for the month of May increased 0.3% which was a half percentage point below consensus expectations. Not only that but April’s reading was also revised down from growth of 0.4% down to 0.3%.  After stripping out Transportation, Factory Orders declined 0.5% while April’s reading was revised from a decline of 0.2% down to a drop of 0.6%.

On a year/year basis, Factory Orders also dipped into negative territory for the first time since October 2020. The chart below shows the historical y/y change in Factory Orders since 1960.  While readings were negative during every recession, there were plenty of other periods where they also declined on a y/y basis and the economy was nowhere near a recession. Not only that but there were also many other periods during economic expansions where Factory Orders dropped by a much larger amount on a y/y basis.

While the magnitude of the decline in Factory Orders hasn’t been extreme, what is unique about the current period is how long the rate of change in Factory Orders has been declining.  The chart below shows streaks where the y/y change in Factory Orders increased (blue line) or declined (red line).  With May’s report, the rate of change in Factory Orders on a year/year basis has declined for a record eight straight months, breaking the prior record of seven months that was seen during recessions in the mid-1970s, early 1980s, and during the Financial Crisis. The fact that prior streaks of similar duration all occurred during recessions isn’t exactly reassuring.  What makes it less worrisome, though, is that the decline is coming after Durable Goods experienced record growth and consistency of growth coming out of the COVID crash.

There’s plenty of evidence out there to cite as reasons why the US economy is teetering on the edge of a recession or merely in a slowdown, and parts of today’s Factory Orders report could honestly be used to help justify either viewpoint.

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Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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Government Regulation

Mama Mia! NYC Rules Crack Down on Coal, Wood, Fired Pizzerias – Must Cut Carbon Emissions Up to 75% (New York Post)
A new mandate by the New York City Department of Environmental Protection is forcing pizzeria owners to hire engineers or architects to design carbon emissions devices that reduce emissions from coal and wood-fired pizza ovens. Is this going too far? [link]

Brazil Votes to Bar Bolsonaro From Office for Election-Fraud Claims (NYT)
Citing a violation of the country’s election laws due to the spread of misinformation, former Brazilian President Jair Bolsonaro has been prohibited from running seeking public office for eight years. In the last election, Bolsonaro received 49.1% of the vote. [link]

Ethics

Harvard Scholar Who Studies Honesty Is Accused of Fabricating Findings (New York Times)
A Harvard Business School scholar with a focus on honesty has been cited for falsifying data in her published studies. Dr. Francesca Gino has authored or co-authored numerous papers studying honesty in insurance claims, tax filings, and other fields, but fellow researchers have found evidence of data manipulation and falsification. [link]

Economy and Markets

The Restart of Student Loan Payments Is Going to Pressure the Strong US Consumer, As 34% of Borrowers Say They’ll Be Unable to Make Payments (Markets Insider)
With student loan payments resuming soon, nearly one-third of US consumers say they will be unable to make payments on their student loans, while 37% claimed they needed to cut spending to make payments, and 29% claimed they will not have to cut spending. [link]

SEC Says Spot Bitcoin ETF Filings Are Inadequate (WSJ)
After numerous unsuccessful attempts, the SEC has once again refused applications from the Nasdaq and CBOE for a spot Bitcoin ETF.  Unlike some rejections in the past, though, the SEC said these applications were insufficiently clear and comprehensive, and that gives the applicants the opportunity to refile the applications. [link]

China’s Economy Shows New Signs of Weakness (WSJ)
China’s reopening was supposed to provide a boost to global growth, but the opposite has been the case in the six months since the country first relaxed COVID restrictions. According to data released overnight, the manufacturing sector contracted for the third straight month. [link]

Corporate Bankruptcies and Defaults Are Surging – Here’s Why (CNBC)
Corporate bankruptcies have soared in 2023 due to high-interest rates. The cost of debt has risen, forcing many companies to file for bankruptcy or even default. So far this year, there have been 324 corporate bankruptcy filings and 41 corporate defaults in the US. [link]

Libor Is Over. We Still Need More Benchmarks to Replace It. (Barron’s)
The world’s most well-known benchmark interest rate for the last 40 years will be officially retired on June 30^th.  While the demise of Libor has been well-known (it started to lose its relevance after the financial crisis) and has been replaced with SOFR (Secured Overnight Funding Rate), new benchmarks should be created for purposes that SOFR is not an optimal benchmark. [link]

Science and Technology

A.I. May Someday Work Medical Miracles. For Now, It Helps Do Paperwork. (New York Times)
AI is making its way into another sector: healthcare. Many doctors are incorporating AI into their paperwork and write-ups, significantly reducing the time spent on these tasks. However, doctors believe it will take quite some time before AI is contributing to diagnoses for a number of reasons.  [link]

“The crew is not drinking urine”: NASA System Helps Astronaut Pee, Sweat to be Recycled (USA Today)
To facilitate long galactic journeys, astronauts aboard the International Space Station are utilizing NASA’s latest innovation: Urine Processor Assembly- a process that recycles human urine by evaporating the liquid and using the humid air byproduct to recover water. The new process helped achieve the team’s goal of 98% water recovery. [link]

Distressed Firms and the Large Effects of Monetary Policy Tightenings (Federal Reserve) 
A recent publication from the Federal Reserve showed that firms in high financial distress are significantly impacted by contracting monetary policy, whereas firms without financial distress are not significantly impacted. Firms in distress see lower investment and employment following a tightening shock, but debt decreases more for firms in distress than healthy firms following a tightening shock. [link]

Tropical Primary Forest Loss Up 10% in 2022 Despite International Pledges to End Deforestation (Earth.org)
During calendar year 2022, the equivalent of 11 football fields of tropical primary forest were destroyed every minute as total deforestation increased by 10% relative to 2021. The total loss resulted in an extra 2.7 gigatons of CO2 emissions, which equals the total of India’s annual emissions. [link]

WHO’s Cancer Research Agency to Say Aspartame Sweetener a Possible Carcinogen (Reuters)
The WHO’s cancer research group’s official report on aspartame is scheduled to be released on July 14, however, a leak from the organization reports the group plans on classifying aspartame as ‘possibly carcinogenic to humans’ alongside radiofrequency electromagnetic fields from mobile phones. Previous professional opinions around aspartame concluded a 60kg (132 pounds) human would have to drink between 12 and 36 cans of diet soda every day to be at risk. [link]

Use a loyalty card or digital coupon when grocery shopping? You’re being tracked. (USA Today)
Is the discount worth it? If you use a shopper loyalty card or digital coupons, odds are that the retailer is tracking things like age, marital or family status, languages spoken, education, gender, ethnicity and race, employment information, or other demographic information. They then take that information and sell it to other information brokers.  Margins on groceries may not be good, but your personal info is another story. [link]

We are wasting up to 20% of our time on computer problems, says study (Tech Explore)If it seems like your computer is always broken, you’re not wrong.  According to one study, people waste 11% to 20% of their time sitting in front of computers that don’t work properly.  So much for being a productivity enhancer. [link]

Transportation

Why Pedestrian Deaths Are Skyrocketing in America (New York Magazine) 
Pedestrian deaths in the United States are increasing faster than other transportation deaths. The main causes for this trend include the increased number of SUVs on the road and a migration out of cities where streets are less optimal for pedestrians. [link]

Joby Aviation reaches new FAA milestone as its electric flying vehicles get closer to takeoff (Fast Company)
With EV automobiles reaching the tipping point in terms of adoption, are air taxis next?  Startup Joby Aviation announced that it has received a permit from the FAA to begin flight testing of its electric flying vehicle. [link]

Turn On Tune In, Drop Out

Magic Mushrooms. LSD. Ketamine. The Drugs That Power Silicon Valley. (WSJ)
Many CEOs and entrepreneurs in Silicon Valley are micro-dosing, or intentionally taking very small amounts of psychedelic drugs to reap productivity and creativity benefits. Some are micro-dosing to help with mental health issues. The development of legal psychedelics has already received significant investment and are projected to more than double by the end of the decade. [link]

Weed-GPT: A New AI Platform Helps Cannabis Consumers Learn ‘What’s Right For Me?’ (Forbes)
AI’s latest use: cannabis-education assistant. Los Angeles-based company Jointly is launching an AI chatbot (SparkAI) on its website aimed at helping cannabis consumers have purposeful consumption. Users can ask the chatbot “What types of cannabis products will help me solve my [insert health problem] problem?” and SparkAI will generate a response based on Jointly’s data collection. [link]

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