Walmart Just Warned the US Economy is COLLAPSING

Walmart became the latest retailer to warn something's not right in the U.S. economy with consumers to start out 2025. Amazon had done the same previously, not to mention retail sales for January that were less than stellar, to put it kindly. And then, this week, S&P Global came out with its PMIs, especially for the services sector, which absolutely plunged. It fell below 50 for the first time in quite a while, which was one of the lowest numbers for the series going back to the start of the series more than a decade ago. So we've got a whole lot of signals coming from Walmart, from PMIs. Consumer confidence, there's another one. Consumer confidence has rolled over sharply. And not only that, the University of Michigan's latest estimates, which were just an update from its preliminary numbers, they declined a further three points to some of the lowest levels that we've seen in a couple of years there as well. So we've got a whole bunch of signals from around the U.S. economy that suggest whatever was going on late last year, it's over and done with. A whole bunch of artificial factors that we've been highlighting all along are proving to have been artificial one-offs, front-loading, pulling forward demand, leaving 2025's economy exposed to the payback. So it starts with Walmart. Walmart said, according to its chief financial officers, they're forecasting uncertainties related to consumer behavior and global economic and geopolitical conditions, which whenever any company uses the term uncertainties, what they're really saying is business is not going the way that we hoped it would. And so the importance of Walmart is Walmart was one of the winners of the last several years. As everyone prated down to get cheaper prices, everybody went flocking to Walmart. Walmart was one of the shining examples of strength in the entire consumer economy. So for Walmart to now say we're seeing weakness now in our business too, it's not as if they're more fluent, newer customers are shifting back to their old patterns. What they're saying is even though we've been doing really well in this economy, now even Walmart is starting to experience the weakness as well. So Steve, Steve Van Meter, let me bring you in here. We've got Walmart, we've got Amazon, we've got retail sales, consumer confidence, and the PMIs, which absolutely plunged. It really does look like the economy that we were looking at, the artificial high last year, has dissipated, it's giving way, and everything is really rolling over here into February 2025. Yeah, you know, Jeff, it's kind of interesting because not long ago, here we were on this island that we'll call the United States, as the rest of the global economy was slowly declining, heading to a recession, everybody here said, hey, look at the rest of the world, we're immune to them because we're the US economy, we're strong and robust. And you and I said, hey, if the rest of the world is going down, we're going to follow. And that's how it always works. The world's largest importer is usually the last to experience things going wrong. And it's interesting you mentioned Walmart, because it's very important to understand what's going on there. It's not just the fact that they said we're seeing a lot of higher income households shopping there. But what's interesting on that standpoint, Jeff, is they're not coming into the stores, they're using the app, and they're doing pickup because they don't want to go into stores, they don't want to be seen inside the stores. But the CFO said something that I think was very interesting. On top of all that, he said, we're expanding our house brand. Now, when you talk about, you know, prosperity and soft landings, and people being able to afford things, you would not hear we're going to expand our house brand, because what he's telling us is, look, people can't afford name brand stuff anymore. And they're struggling financially. And the only answer we have is to put more of our house label on the shelf. Yeah, that's weird, right? Because everybody went to Walmart, even the affluent shoppers. I mean, that was the big thing. They kept talking about the last couple years, how they're seeing people who make more than $100,000 a year, suddenly they're shopping at Walmart, too. So if Walmart is now saying to people who came there for cheaper goods are now demanding even cheaper goods from Walmart, like more and more house brands, that's another sign of a couple big factors that we've been talking about constantly the last couple years, starting with the fact that, you know, incomes have not caught up to the last price changes from a couple years ago. And they're still not keeping up with price changes that are going on today. People are falling further and further behind. And like you said, they don't want to be shopping at Walmart, but they don't really have any other alternative. And then you throw on top of that the threat of whether it be tariffs or more labor market dysfunction and disruption and less hours worked and all the distressful signals that we've been getting, you throw more uncertainty. There's the term. Uncertainty. It's everything that falls under that umbrella. You throw more uncertainty into the mix, and people are really scared about where things are going here. They already can't afford the lifestyle that they thought they had before, and they don't see any way out of this mess. And if anything, it looks like it's just bombarding them from all sides, whether it be price changes, the labor market, general economy, uncertainty, geopolitical uncertainty. It doesn't really matter. So for Walmart to come out and say, like you said, Steve, house brands, that's what everybody was going to Walmart to begin with. And now they're saying we need to trade down even more. Before we get back to the rest of today's video, I want to tell you about today's video sponsor. I've been doing this for quite some time, and I've been approached by sponsors before, and I've turned all of them down because I'm not interested in selling just random stuff here on the channel. But today's video sponsor, Monetary Metals, not just some random company. 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You can join the thousands of investors that are already earning monthly interest on their physical gold and silver holdings with Monetary Metals. There's a link in the description of this video for all the information you need on what Monetary Metals has to offer. We thank them very much for their sponsorship. Now back to the video. Yeah, Jeff, because this all comes back to the consumer. Let's go back to the election for a moment. What did we hear going into that from all these corporate executives, from small business? We saw this in the Optimism Index. What did they say? That the economy was going to surge after the election, particularly if Trump won and that people were holding back, which I thought that was kind of interesting that they're just waiting to see who wins and then they're going to unleash all this money into the economy. And you and I sat back and said, that just doesn't seem likely based on what we're looking at. But it all comes back to these executives didn't want to tell us the truth because they didn't want to see their stock price decline. And now they're saying, well, this looks a bit unexpected. There's uncertainty. Well, the answer is that consumers didn't come out and spend because you pointed out their incomes didn't keep up with inflation. Now, we can argue that average hourly earnings are running at a relatively strong clip historically, and they are. But the problem is hours of work continues to decline. So this is kind of one of those backhanded thank yous. Hey, I'm going to give you a raise. By the way, I just cut your hours. So you're in the end of the day, people go home and say, hey, look, I'm making more money. And they get their paycheck and say, wait a minute, I take home less. And so all of a sudden in these optimism indices, we see a massive reversal. And now Walmart's saying, well, we don't know what changed, but they knew all along that consumers couldn't keep up. And what are we hearing now from the manufacturing services PMI we just got from S&P Global? Prices are going up. And the excuse, which I love, the geopolitical excuse and, well, the government's doing this thing. But one of the things that came up in both the services and the manufacturing side, Jeff, was, well, we can't afford to give our employees higher wages. They want them. So we've got to raise the price. Yeah. And that's something we talked about many times before as well. Right. Every time we see this, these periods where prices go up for especially things that you can't get away from, whether it be gasoline or energy costs or a big one. We just talked about this last week. Auto insurance premiums. You see, auto insurance premiums surge, which has nothing to do with the economy today. It's the price changes from a couple of years ago that auto insurance providers are just catching up to. As they raise their premiums, people can't afford those higher premiums. They have to take spending away from somewhere else. And that's, as you mentioned, Steve, the PMIs, the PMI data looks exactly like that, especially where you see it now on the services side of the economy. It looks as though as those prices went up over the last couple of months, egg prices, another one, food prices, auto insurance, as those prices went up because incomes didn't adjust, jobs really didn't, haven't really grown, hours are being trimmed, as you keep pointing out, the services took a real hit. According to S&P Global's PMI for the month of February, the flash reading, the services index fell below 50, which in the services PMIs, anything below 53, you're in downturn, slowdown, danger zone territory, anything below 50, now you're talking about really serious stuff. Now we'll see if it sticks around more than just the month of February, but for what I think really stands out here is that you go back to December, December, the flash reading for S&P Global Services PMI was above 58. Then it was revised lower for the final reading for the month. And then in January, it came out down to 52.9, and now we're here at 49.7. So we're talking about in a matter of just a couple of months, going from 58 to below 50. What that indicates is not just a weakness in the economy, but maybe more importantly, what Walmart and Amazon are getting at, a sharp drop in momentum. The sharp drop in momentum, given these conditions, is a really bad mix. Yeah, Jeff, and isn't this interesting, we're talking about services, because that was supposed to lead not just the U.S. economy, but the entire global economy out of the slump. And we said it once again, not how it works, where manufacturing goes, services does eventually fall over the lag and everything. Yeah, that's how it used to work, but everything's different now. But that's not the case, because what happened, as you mentioned, into the year, there was all this euphoria, because consumers did come out and spend, because they knew the tariffs were coming. And look, it makes sense. I did the same thing. I bought stuff that I don't need right now, but I know I'm going to need later this year. So I bought it knowing the prices were likely to go up. And then what happened? Going into January and now February, all of a sudden, demand just plunges. Consumers say, look, hey, I'm tapped out. My insurance costs are going up, rent's going up, food's going up, energy is going up. My credit card bill has gone up a whole bunch. I got to cut spending. And we know that impacts the services side and the discretionary side in a major way. All of a sudden, the PMI is plunging. Makes perfect sense, because as you start to look at this, you have price pressure rising. You see hours of work declining. We know that's going to lead to more unemployment. It's called stagflation, Jeff. Yeah, I like to call it the forgot-how-to-grow-economy, because we keep going to the same thing over and over and over again. And it's like the mainstream keeps expecting different results, because you're exactly right here. Services were never going to be a leading thing. They're always usually lagging. And the fact that they held up as long as they did was, in one sense, remarkable. But that's the forgot-how-to-grow-economy. It doesn't look like a recession or a traditional recession, but it also doesn't look like an economic boom either. It kind of falls into this in-between area. But you can tell that it's not really in between. It's just slowly transitioning toward the more and more visible and evident weakness. And that's kind of what we're getting here, especially after the sort of sugar-high artificial rush at the end of last year. And there are a couple of reasons for it, not just the election and everything around that. A lot of people got really excited about the prospects of the Fed cutting rates. As we know, they don't really do anything. But a lot of people believe that they do. And so it was understandable that sentiment jumped. Some spending came in, as you said, for the tariffs, which seemed to validate the thesis, right? If you're thinking that rate cuts help, and then all of a sudden spending ticks up a little bit, you think, oh, the rate cuts actually work. So you get this artificial front-loading of activity, and then you get to the other side of it. And it really is like somebody just pulled the rug out from everything. So what we're seeing in the data is basically confirming that part of it, the short-run fluctuation where we went through the artificial high, now transitioning to something else entirely in 2025. And there's a quote here. I think it's not just about the early part of this year. The quote that Steve flagged here, I think from S&P Global, really defines what we're talking about, because it's the outlook that has really shifted as well. And the quote from the chief economist from S&P Global on the US PMI was, optimism about the year ahead has slumped from the near three-year high seen at the turn of the year, that's December, to one of the gloomiest since the pandemic. And that's really, it goes along with the loss of momentum. Everybody was sky high, rate cuts, the election, and whatever else you want to throw on top of it, Christmas and just regular holiday cheer, whatever it was. Everybody was really optimistic at the end of last year. And then all of a sudden, it is like the rug got yanked out from under everyone. Optimism has plummeted. Activity just isn't there at the very best. That's what Walmart's saying. Some of these other PMIs and some of the other data that we're getting shows that it's not just that activity isn't there, it's actively accelerating to the downside, which is something we see more clearly in places outside the US. But what we're saying is that the economy here is, you know, it's starting to reveal the underlying fundamentals that we said was there the entire time. But Jeff, there was one thing that was kind of like the strength, the kind of foundation of everything here that said, maybe things would be okay. And that was the labor market. You know, the Fed kept saying, hey, look, unemployment rate was going to get to around 4.1 in reverse. And well, sure enough, it did. You know, we hear other people say, look, yeah, we're laying off a few people here, but the economy's strong. It can absorb these workers. We look at the continued claims data, hovering just shy of 2 million, saying, look, no, these people that are going on employment, yes, some of them are getting jobs, but a lot of them are getting stuck there. But nevertheless, everyone said, look, due to all this demand, this pent-up demand that was going to hit the economy, businesses were going to need to hire, and they're going to hire big because things were going to change in a big way. Tariffs are going to bring jobs back. And we said, hold on, wait a second, that's not how this plays out. And what did we see? In the services sector, PMI, Jeff, oh, we're starting to lay people off. And the manufacturing sector said, hey, we're not laying off just yet because we're inventory building ahead of the tariffs, which is really smart because that means we're going to build stuff at a price today and mark it up when the tariffs hit and try to fatten our margins. And then when that happens and the tariffs hit, we see demand go down. Well, we're going to cut our workforce. And that's, I think, what we're seeing in the sentiment surveys all of a sudden from workers is saying, wait a minute, I thought things were going to get better. I thought I was going to get bigger pay raises and more hours, and I was going to be able to afford all these things. And now I'm finding out that all along, my boss was planning on cutting, and now they're starting to do it. Yeah, they're starting to do it because activity, I mean, that was part of the PMIs too, is that you can tell in the language that they use, not just from the quotes from the economists, but even just the text, they're kind of surprised the fact that they found, let me read a quote here, new order growth also weakened sharply and business expectations for the year ahead slumped amid growing concerns and uncertainty related to federal government policies, always blaming on tariffs. The upturn in manufacturing output was also linked in part to the front running of tariffs, hinting at merely a temporary boost. So you're seeing it in all these different angles, whether it be new orders, employments, where we got a little bit of a high last year, everybody gets excited, and now it's wearing off. You mentioned consumer confidence or worker confidence, guess what really consumer confidence is? It's a reflection of labor market conditions or perceptions of labor market conditions from the consumer perspective. And like I said in the intro here, the University of Michigan, they're not the only one, but there's just the latest one. They reported a sharp decline in consumer confidence from January into the preliminary data from February. And then just two weeks later, with only about, what is it, 15% of the survey left to collect and tabulate, they dropped their numbers by a sharp three points in almost every single category. So you have the University of Michigan Consumer Confidence Index falling to 64.7 when it had been 67.8 just a couple of weeks ago for the same month. And that had been as high as 74 back in December. So you're talking about a 10 point swing in a relatively short period of time. And again, like we're seeing in other consumer confidence numbers, Michigan notes, what's driving confidence lower? First of all, obviously geopolitical uncertainties, got to get that out of the way. But again, consumers are starting to come back to the same concerns, which are jobs and incomes. That's what's underlying everything and has been this entire cycle, which is one reason why Steve, you and I, as we continue to say on the show, we're never really buying into the upturn to begin with, because those are the fundamentals that matter. Whatever the short run variations, it was always jobs and incomes. Unless something changes there, nothing else is going to change anywhere else. Yeah, Jeff, it's interesting because in the Michigan survey response said, we're concerned about our financial situation. Now, this, of course, is valid in everything we're saying. Look, hours worked have been on a long trending decline. And just because you're getting a pay raise, does it matter if your take home pay goes down? Then they're looking at, of course, the factor is, yes, my check's going down, but when I go to the store, prices have gone up even more. So now I'm spending even less. And so their financial fears are starting to rise. And then you look at the other part of the survey and it talks about buying conditions. And what do you see? Across the board, people are saying, look, I'm not going to go out and buy large chicken items or houses or cars because I'm not confident I'm going to have a job or the income to afford it. And I most certainly don't want to pay these high prices. So you think people say, wait a minute, why can't the economy boom? If consumers don't come out and spend, it can't. And then you start to think about, well, we can't get a deflationary recession. That's not going to happen. But we're getting an inventory build. And this is exactly what happens when you get inventory recessions on top of stagflations. You're seeing literally the same setup. I forget what you called it at the beginning of the show before we filmed, Jeff, but we're seeing this happen over and over again. Yeah, it's one of those things. It's like Einstein's definition of insanity, right? We keep expecting a recovery or an upturn to happen, and it never does. It's like, again, the forget how to grow economy. We go back and forth, left and right. Every time you get a little bit of a short run upswing, it just fails and it doesn't lead to the recovery. We've seen the same pattern over and over again. It's something you said, Steve, I think we should finish up here with. Everybody said, OK, we see that in Europe. We see that in now New Zealand or in Brazil or some other places, China. China's a big one. But it didn't apply to the US. The US was the only island of stability and an entire ocean of economic weakness. Now that we get past the short run upturn, the artificial high from last year, what are we getting? We're getting exactly what we saw everywhere else because at the end of the day, the economy is a globally synchronized economy. And if one part of it's experiencing a downturn, at some point, everywhere else is going to experiencing it too. What we're thinking now and what we're seeing in some of the data is whether or not this is that point. Walmart became the latest retail oriented company. Damn it. Walmart became the... Don't laugh. No, it sucks when the first like not even three words and you're now I'm going to go have lunch while you figure this out. Yeah, now we're going to be here forever. If you hadn't laughed. Yep.