Daily SA: Economic Index Suggests Recession is Already Here (Fri, 21 July 23) – Forward Observer

Daily SA: Economic Index Suggests Recession is Already Here (Fri, 21 July 23)

Good morning. Here’s your Daily Situational Awareness for Friday, 21 July 2023.


  • READ TIME: 5 Minutes, 50 Seconds
  • Inside the Beltway
    • (1) Is Joe Manchin Gearing Up for a Third-Party Run?
    • (2) White House Trying to Get Ahead of Next Debt Limit Fight
  • Domestic INTSUM
    • (3) Bidenomics Chip Push Hits Snag with TSMC Arizona Delay
    • (4) Fed Launches New Payments System
    • (5) Economic Index Suggests Recession is Already Here
    • (6) Diesel Stocks Depleted
  • Russia-NATO SITREP
    • (7) Moscow: No Plans to Attack Civilian Shipping in Black Sea
  • China & Indo-Pacific SITREP
    • (8) China Activates Emergency Flood Response in Hebei
    • (9) U.S. Gov Lays Groundwork for Campaign in Tajikistan


  • (1) IS JOE MANCHIN GEARING UP FOR A THIRD-PARTY RUN?: At a New Hampshire forum hosted by No Labels with Senator Joe Manchin (D-WV) and former Utah Governor John Huntsman (R) this week, Manchin said he and Huntsman were “here to make sure the American people have an option.”
    • According to a Monmouth University poll, 30% of registered voters said they were open to a “fusion” third-party Republican and Democrat ticket for President and VP, and 16% supported Manchin and Huntsman.
    • A Quinnipiac University poll found that 47% of voters would consider a third-party candidate for the 2024 Presidential election.
    • Why It Matters: Manchin is avoiding making any commitments for 2024, including running for reelection for his Senate seat, and Democratic political operatives are taking a third-party ticket from No Labels seriously. Manchin running on a third-party ticket could peel off enough voters in battleground states to give former President Trump the edge over President Biden in the 2024 general election and make the 2024 Senate map even worse for Democrats. Manchin has the motive to throw a monkey wrench in the Democrat’s gears: he pushed hard in the fall to get support for the Mountain Valley Pipeline (MVP). He was denied at the last minute and made a deal to get the MVP moving forward in the debt-ceiling deal, but now it is being held up by the Fourth Circuit Court of Appeals in a suit by environmental groups. – R.C.
  • (2) WHITE HOUSE TRYING TO GET AHEAD OF NEXT DEBT LIMIT FIGHT: President Biden directed White House Counsel Stuart Delery and National Economic Council Director Lael Brainard to lead a working group to circumvent future fights over the debt ceiling.
    • The White House said the working group will consider actions Congress can take and “Constitution-based” solutions to avert future debt-ceiling standoffs.
    • Why It Matters: The latest debt-ceiling fight came down to the wire, but a deal was made that pushed the next debt-ceiling fight to right after the 2024 election. The White House was reportedly considering invoking the 14th Amendment to raise the debt limit unilaterally, but a deal was made before the legality of a “Constitution-based” solution was tested. The Biden administration could be preparing to preempt an immediate fight over the debt ceiling in the case Republicans do take control of the Senate and maintain control of the House. – R.C.


  • (3) BIDENOMICS CHIP PUSH HITS SNAG WITH TSMC ARIZONA DELAY: Taiwan Semiconductor Manufacturing Company (TSMC) announced a production delay at their new Arizona fabrication facility due to a lack of skilled labor and is now expecting production to begin by 2025.
    • Republican consultant Marcus Dell’Artino who works in Phoenix, said, “nobody is shocked” TSMC had issues with hiring skilled labor. Still, it was shocking that “nobody saw this problem coming” with the increasing cost of living and competition for workers in Arizona. 
    • Why It Matters: This is another blow for “Bidenomics”; bringing semiconductor manufacturing back to the U.S. was a major policy win for the White House, and the delay pushing production at the TSMC facility until after the election will take some wind out of the sails of an already slow-starting Biden reelection campaign struggling to win over Americans on economic performance. – R.C.
  • (4) FED LAUNCHES NEW PAYMENTS SYSTEM: Yesterday, the Federal Reserve upgraded to the FedNow payments system, which is intended to allow faster bank-to-bank transfers and bill payments around the clock.
    • Starting out, only a small number of banks, credit unions, and other financial firms that work with lenders will participate in FedNow.
    • Fed officials expect it will take a couple of years before FedNow gains widespread adoption.
    • Why It Matters: There have been concerns that FedNow will eventually transition from a bank-to-bank payment system into a retail central bank digital currency (CBDC). But Fed Chair Jerome Powell, JPMorgan’s Jamie Dimon, and other Wall Street bank CEOs don’t support this policy, and their incentives don’t align with it. A CBDC would end around and kill the commercial banking system and leave bank CEOs without their powerful, well-paid jobs. – H.B.
  • (5) ECONOMIC INDEX SUGGESTS RECESSION IS ALREADY HERE: The Conference Board Leading Economic Index (LEI) – which includes initial unemployment claims, new manufacturing orders, new building permits, and seven other components – posted a decline for the 15th consecutive month, the longest streak since the leadup to the 2008 financial crisis.
    • A Conference Board senior manager said, “We forecast that the U.S. economy is likely to be in a recession from Q3 2023 to Q1 2024.”
    • Why It Matters: Since the Conference Board created the LEI in 1996, it’s been a reliable recession forecasting tool. But while LEI analysts think that a recession is already here, some investment bank economists are pushing out their recession dates and lowering their recession probabilities. Going into an election year, the Democrat-friendly National Bureau of Economic Research (NBER) – the nonprofit organization in charge of declaring recessions – may wait until 2025 to back-date the recession’s start. – H.B.
  • (6) DIESEL STOCKS DEPLETED: U.S. distillate fuel oil inventories–including diesel fuel plus fuel oils used in heating and electric power generation – are 15% below the 10-year seasonal average.
    • One year ago, U.S. distillate stocks were 19% below the 10-year seasonal average.  
    • U.S. refineries are running at 94% of their maximum capacity – the highest rate since 2015.
    • Why It Matters: So far, the U.S. economy has not slowed down enough to rebuild distillate fuel inventories. If industrial activity rises and America avoids a deep, prolonged recession, distillate fuel stocks will fall to critically low levels. This risks U.S. national security when there’s a greater risk of global war. – H.B.



  • (7) MOSCOW: NO PLANS TO ATTACK CIVILIAN SHIPPING IN BLACK SEA: Russia’s ambassador to the U.S. said that Moscow has no plans to attack civilian shipping in the Black Sea and attempts to say otherwise are a falsification.
    • On Wednesday, Moscow said it would consider all ships traveling to Ukrainian ports as potential carriers of military cargo and their flag countries to be parties to the conflict on the Ukrainian side.
    • Why It Matters: Russia has declared large sectors of the Black Sea unsafe for navigation and announced it will not permit transit to Ukrainian ports. U.S. officials then claimed that Russia planned to attack civilian shipping. It is unlikely that Russia would waste resources on civilian shipping not destined for Ukrainian ports. It is likely that Russia intends to blockade Ukrainian ports on the Black Sea, and its declaration that vessels inbound to those ports are considered combatants still stands. – M.M.

China & Indo-Pacific SITREP

  • (8) CHINA ACTIVATES EMERGENCY FLOOD RESPONSE IN HEBEI: Beijing and the Hebei province are under emergency flood control measures after 6 inches of rain hit the region yesterday.
    • Floods are expected to hit the Hai River basin in the coming three days, and the major port of Tianjin is likely to be impacted by the flooding. 
    • Why It Matters: The emergency flood control measures will likely impact manufacturing and shipping in Hebei province and could result in some supply chain disruptions for Western consumers. – M.M.
  • (9) U.S. GOV LAYS GROUNDWORK FOR CAMPAIGN IN TAJIKISTAN: At a meeting of the U.S. Commission on International Religious Freedom (USCIRF), numerous panelists laid out the Tajik Government’s suppression of all religions, predominantly Islam.
    • The panelists repeatedly requested U.S. Foreign Policy updates to pressure Tajikistan into allowing Ismaili Shia Muslims (0.4% of the population) to freely practice their religion. 
    • Commissioner Nury Turkel claims the Ismaili are ideologically aligned with democratic practices.
    • The Tajik government touts its suppression as a counterterrorism measure after several Ismailis committed terrorist acts in neighboring countries, particularly China.
    • Why It Matters: China and Afghanistan recently opened a railway that runs through Tajikistan to circumnavigate the Karakoram Mountains. If the U.S. successfully lobbies for Ismaili freedom, they have a built-in, pre-radicalized native group in the middle of China’s new Silk Road with minimal guidance. – J.V.

China-Afghan Railway; Line 5-4 crosses Tajikistan.

Low Intensity Conflict SITREP (Next 48 hours)

  • San Diego, CA – Socialist Democrat Alternative is planning a protest and meeting to organize against anti-trans bills passed across the United States. The meeting is planned for 1530 PDT on Saturday, 22 July, at 3795 Fairmount Ave. San Diego, CA.


M.S. indicates analyst commentary from Mike Shelby

M.M. indicates analyst commentary from Max Morton

J.V.  indicates analyst commentary from Jared Vaughn

R.C. indicates analyst commentary from Robert Cook

H.B. indicates analyst commentary from Harrison Burge

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