Hello everyone. The latest Federal Reserve Beige Book and economic data depict a clear picture of the U.S. economy being 'a tale of two cities' — AI investment is booming, while the traditional economy feels the chill.
1. Bone-chilling cold: The 'cold reality' of manufacturing and consumption
First, a key piece of data has raised the alarm: the Chicago PMI plummeted to 36.3 in November, marking a new low since May of this year.
How bad is this number?
Far below the 50 threshold, indicating that manufacturing is in a 'severe recession'** range.
Economic activity is significantly shrinking, exerting comprehensive pressure on employment, new orders, and supply chain confidence.
Meanwhile, the Beige Book reveals the 'cold' side of the economy:
1. The job market is cooling: Over the past six weeks, job seekers have not seen much positive progress.
2. Stubborn inflation: Prices remain high, and the reasons are not solely due to tariffs.
3. Polarized consumption (K-shaped economy): Ordinary consumers are cutting back on spending, while the affluent class continues to drive strong sales in high-end retail.
4. The far-reaching impact of the government shutdown: Its negative effects extend far beyond the pay freeze for federal employees and have affected broader economic aspects.
II. Booming: The 'hot prosperity' of the AI sector
In the overall chill of the economy, there is one area that is exceptionally hot: Artificial Intelligence (AI).
The Beige Book clearly points out that AI is leading to a surge in investments in certain areas.
But the other side of this fervor is that hiring in other areas has shrunk.
This confirms that sharp judgment: the current growth of the US economy is almost entirely dependent on AI's 'suspension'.
III. Market Impact and Outlook
This 'ice and fire' pattern means for the market and policy:
For the US stock market: Tech stocks, especially those related to AI concepts, will continue to diverge from traditional economic sectors. The market structure has become fragile, increasingly reliant on the performance of a few giants.
For the Federal Reserve: They are facing a divided dilemma: on one hand, there is pressure to lower interest rates due to manufacturing recession and weak consumer spending; on the other hand, there are still high inflation rates and the risks of overheating AI investments. This puts them in a difficult position when formulating policies.
In summary, the current US economy relies on AI as the only 'engine', while traditional sectors have become 'dragging anchors'. In this division of investment, one must remain particularly clear-headed: recognizing the enormous opportunities brought by AI, while also maintaining vigilance over the overall fragility of the economy.
Friendly reminder: The US stock market will be closed on Thanksgiving Thursday and will only trade half a day on Friday. Wishing everyone a happy holiday!