CNBC’s Jim Cramer admitted it’s difficult to “analyze this economy,” but he pointed to signs of a slowdown Tuesday, looking at several recent weak earnings reports and new U.S. manufacturing and services data .
Cramer called these factors “brown shoots” disrupting U.S. economic growth.
“When you combine the anecdotal evidence with the empirical evidence – the PMI report – you can see that right now the brown shoots are infecting the green,” he said. “And that’s exactly what we need for the Fed to justify cutting rates.”
While some companies are releasing positive financial reports, Cramer said profits have become “patchy.” He attributed the used car dealer CarMaxProfits are lower than expected, partly because of high financing costs. He also said that a home furnishings retailer HR‘s activity has been affected by high rates and a lack of new home sales.
But for Cramer, data from the S&P Global Flash U.S. Composite Purchasing Managers’ Index is crucial to getting a sense of the current economy. The index showed lower-than-expected figures for manufacturing and services, with the former at its lowest level in four months. Cramer said the data could have put a “near-term Fed rate cut” on the table and specifically highlighted a section of the report suggesting staffing cuts in the services.
“Apart from the first wave of the Covid-19 pandemic, the drop in staff numbers in services in April was the most pronounced since the end of 2009,” the report said.
“Very bad news for the economy,” Cramer said. “But remember, we need bad news for the economy, because that’s what’s holding back inflation – which is also noted in this PMI report.”
CarMax and RH did not immediately respond to requests for comment.
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