Dallas Fed Respondents Blast “Poor National Leadership” As Stagflation ‘Erodes Business Confidence’

It has been a mixed morning on the macro side… to say the least.

Philly Fed Services jumped into expansion (to two year highs?), Chicago Fed National Activity Index surged, Case-Shiller home prices hit a new record high but appreciation slowed, Conference Board Expectations hovers near decade lows, Richmond Fed Manufacturing tumbled, Dallas Fed Services improved but remains in contraction…

But, below the hood of the last one we see some more interesting dynamics evolving as revenues and employment decline while prices re-accelerate…

Source: Bloomberg

This is the 25th straight month of contraction (sub-zero) for the Dallas Fed Services index and judging by the respondents’ comments, there is a clear place to point the finger of blame:

Poor national leadership and lack of confidence have eroded the business environment.

• The Federal Reserve’s recent  announcement of no rate cuts in the near future is concerning regarding the  immediate and lag effect it could  have on the local economy. We have received  direct feedback from many of our clients in various industries, and they are  increasingly concerned. They are freezing hires and spending, with many  reducing spending. The primary reason is the economic stagnation locally and  nationally affecting their businesses.

• People are adjusting to new economic realities. Few are expecting salary increases and are instead making lifestyle  adjustments to deal with higher living costs. Reality is also setting  in for the apartment owners we serve. They understand rents aren’t going up and  interest rates aren’t coming down. As rate caps expire and loans mature,  lenders are having to adapt as well. Ultimately, a lot of private equity (much  in the form of individual retirement savings put into syndications) is getting  wiped out.

• We need a rate cut before we will  see any revenue improvement from home sales.

• As elections draw near, the political environment worsens, creating more uncertainty in our business.

• We feel inflation and fear of more inflation plus the rise in cost of living are holding consumers back. Hopefully we will adapt to the new realities soon.

Customers are concerned about the election, so they are holding off on large purchases.

• The lack of building activity is  shutting down the appliance industry.

• Affordability has become an ever-increasing problem for new car dealers. The price increases of new cars combined with  higher interest rates have put new cars out of reach for more and more people.

• [Car] inventories continue to swell, and  interest rates remain high. Our grosses are off, and margins continue to  decline. Profits are down 20  percent from the prior year.

• The economy is slowing. The consumer  is more cautious and more reluctant to purchase at higher prices and payments.

And finally, this seemed to sum up just how business-owners feel in general about the current occupant of The White House:

“Our outlook depends heavily on the presidential  election.”

But, but, but… Bidenomics!!!!???