Hello everybody.

So we are back for another installment

of our economic outlook

and today we're gonna do things a little bit differently.

We're gonna talk about the most recent data

and sort of synthesize it in relation to

what it means about the upcoming holiday season.

So what we're gonna see is

that supply chains have largely normalized

or looking really resilient.

You also see that inventories look a bit

leaner than pre 2020.

They appear to be in very healthy spot

as we head into the holiday season.

Last but not least, we do see some consumer bifurcation,

although discretionary spending

as a whole looks very strong.

So what's what this is gonna look like is certain segments

are going to outperform others,

but overall we do expect a very resilient holiday season.

So to really jump right off,

let's dive into the supply chain metrics first.

And what we see is

that the New York Fed global supply chain pressure index

registered slightly negative in August.

So it was around minus 0.08.

That indicates that bottlenecks are really minimal,

especially compared to sort of more recent years.

Um, so this is a really good sign overall

for supply chain dynamics.

It means that businesses appear to be very well positioned

to, um, to sort of meet needs on their own internal side.

On the domestic front though,

we see a little bit more softness.

So a little bit more nuance here.

When we look at the ISM manufacturing index, for example,

it came in at 49.1 in September.

Now anything less than 50 is a contraction signal.

Um, we also saw ISM services.

It landed right at 50, so I call

that a little bit more neutral.

It sort of right at the line, meaning

that it's quite, quite flat.

But we did see new orders slip to 50.4

and the US goods trade deficit narrowed a bit in August.

So that reflects a little bit of a softer import poll.

Now all of these dynamics together, they point

to a little bit of softer momentum heading into November

and December, um, than we've seen in the past few months.

We're gonna talk about after inventories, why this might be,

but it does set us up for a little bit

of a trickier dynamic when we look on the consumer front.

Now next we're gonna talk about inventory levels.

And when we look at overall retail inventories, we see

that we appear to be also in quite a good spot

on the business side.

So retail inventories in August, they stood at 809 billion,

essentially flat month over month.

When we exclude autos,

advanced estimates showed a modest 0.3% increase

and wholesale inventories increased by 0.1%.

So all in all inventories are looking very stable.

Now what this means when we look at the supply side front,

um, the supply chain front

and the inventory front is that all

of these factors are really steady enough to support demand.

So we don't really have the risk of overhang that led

to more steep discounts in like they did in previous years.

So things look very good on that front.

However, when we break out what's happening

with the consumer, of course we see it's a little bit

of a trickier landscape, right?

So we just saw consumer sentiment come in.

It fell three points in September as sentiment continues

to be really subdued in the United States.

And this is mainly being driven

by future economic expectations.

Now at the same time, discretionary spending has

remained quite robust.

So we just saw some,

some data restatements in consumer spending that continue

to support lifts for the overall economy.

That was very, that was taken very

well, that was great to see.

And our own estimates do anticipate that Q4 growth.

So really that holiday season growth is tracking about 5%

year over year versus about 6% last year.

Now what we are seeing, right, well

that's quite resilient is that gains are really anticipated

to be concentrated among higher income consumers.

We do see quite a bit more softness when we look at the

middle and low income dynamics and,

and their overall spending capabilities.

And so that's when we really get into sort of that more

consumer bifurcation front of the story.

Now base case, right?

If we're heading into this holiday season,

we do anticipate about mid single digit growth.

Um, volumes are likely to be a little bit flat,

maybe a little bit negative depending on the product mix,

but nominal sales are expected to be up year over year.

Now we really see drivers being subdued, consumer sentiment,

some um, adequate inventory levels

and of course really great resilient supply chain metrics.

So all of that's really going to support holiday spending.

As we get into Q4, on the, um, overall skew,

we do see growth really concentrated in high tiers as well

as value tiers simultaneously.

And that's really getting into the di demographics

that we see where high income consumers continue to be able

to spend, spend, spend as they sort of have, um,

this great asset appreciation that's really working

to bolster their overall spending capability.

Now on the other side, we see a lot of value tier room to,

to maneuver because

of course we have lower income demographics

and middle income demographics

that are struggling a little bit

more to uphold their spending.

Now things that could really bring us down a little bit, um,

continued labor market contraction, if we continue

to see really low hiring, if we see

that increase in unemployment, of course,

if we see an asset price correction, all

of these things could really land us into a bit more

of a suboptimal holiday season.

But all things, um, all things equal,

it looks like it's going to be quite resilient, especially

for certain product lines.

And so with that, if you would like to reach out to board

to see how you might be able to

maneuver this economic situation

to best benefit your customers

and your business, please feel free to reach out.

We would love to give you a demo.

And that is all I have for you today.

So with that, I will see you again next month.