Growth Deceleration and The Dollar Wrecking Ball

June PMI data for the United States and the eurozone show economic contraction underway and that the worst is yet to come. What does it mean for bitcoin?

Growth Deceleration to Economic Contraction

In today’s issue we present a broad overview of the ever-changing global macroeconomic environment, and finish with its implications for bitcoin.

“The pace of US economic growth has slowed sharply in June, with deteriorating forward-looking indicators setting the scene for an economic contraction in the third quarter.”

That quote is from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence along with their latest release of the June 2022 S&P Global Flash US PMI Composite Index. Measured across new sales orders, input costs, employment, work backlogs and business confidence, PMI (Purchasing Managers’ Index) survey data acts as a timely and leading indicator to assess economic health. The latest PMI reading came in this morning at an extremely ugly 52, below expectations of 56. The slowdown in manufacturing can be attributed to sharp rises in the costs of energy and commodities at the same time that rates are increasing at a record pace.

The data shows the first contraction in new orders since July 2020, the steepest pace of new export order contractions since June 2020, slowing inflation in input prices, slowing employment gains and the lowest business confidence since comparable 2012 data. This is not just in the United States either. It’s a similar story in the U.K. and eurozone PMI data as well. Households are struggling under the weight of inflation and we will likely see this continue to show up as a hit to both earnings and growth as the business cycle turns over.