According to a gauge of business conditions tracked by Morgan Stanley, the index fell 32 points last month, marking its sharpest collapse since the metric was formulated. Morgan Stanley’s proprietary Business Conditions Index, or MSBCI, hit its lowest point since the 2007-2008 financial crisis.
The MSBCI is said to measure the business environment – whether it is favorable or not. It looks incredibly unfavorable right now and is at levels not seen since the Great Recession. A separate composite business-condition index also fell by the most since 2008 and hit its lowest level since February of 2016, according to a report by Market Watch.
There continues to be intensifying anxiety in businesses around the United State’s trade relationship with China and other major international counterparts. This trade war has dramatically hurt the confidence of business leaders because the unresolved tariff battles have made it difficult for corporate chieftains to develop business strategies and forced many companies to alter their supply chains. Businesses are being forced to make the terrible decision of raising prices in an economy which has a majority of households (78%) living paycheck to paycheck, making consumers pay for the tariffs, or absorbing the costs at the expense of their bottom line. Most won’t choose the latter, and this could result in an expanded retail apocalypse, slower economy, and loss of jobs.
Morgan Stanley also said that its index also reflects an apparent slowdown in domestic jobs growth. The cold hard truth is that the U.S. created a mere 75,000 new jobs in May, well off the consensus forecast for some 185,000 jobs created on the month. This is likely marking a significant change of momentum in what has been a pillar of strength in the domestic economy. The fact is that the American worker is being crushed under taxation and regulations and it will eventually come to a head dramatically.
Economists for the report, led by Ellen Zentner, wrote that the fall in business conditions is “consistent with the slowdown in gross hirings reflected in the latest employment report for May, and raising the risk that weakness in labor demand persists into next month’s report.” According to Market Watch, Morgan Stanley said that taken with other metrics that drill down deeper into financial conditions, “these indicators point to business expansion coming to a near halt in June.”
With the business expansion coming to a stop and the retail apocalypse that’s ongoing, consumers are going to face rising prices and a rapidly failing economy. We are all staring down an economic disaster. If anything is worth preparing for, it’s that!