text: Turning to U.S. markets, we’re seeing some indicators pointing to an economic slowdown. According to Freight Waves CEO Craig Fuller, a “freight recession is imminent.” Comments from other industries confirm that the U.S. and global economies are slowing. “I don’t think anybody really understands what’s coming from an inflation point of view… And I don’t think anybody really understands how high prices are going to go everywhere,” Restoration Hardware CEO Gary Friedman said. Friedman believes slowdowns are coming in every sector. Taiwan Semiconductor Manufacturing Co. Chairman Mark Liu also says he sees a slowdown, as sales of “smartphones, PCs, and TVs, especially in China, the biggest consumer market” are trending down.While inflation might be the obvious cause, the U.S. economic slowdown is at least partially caused by high inventories, shown in the charts above. Due to increased demand coming out of pandemic lockdowns, retailers, in some cases, doubled and tripled orders expecting sustained demand. Retail and wholesale inventories went parabolic, but high inventories become cost-prohibitive, which is likely leading to a slowdown. The latest ISM surveys for manufacturing and non-manufacturing are both trending down, which would confirm an economic slowdown.Meanwhile, month-over-month consumer spending for March was up 0.5%, compared to a 0.3% month-over-month increase in February. At first glance, consumer spending increased, however, inflation-adjusted numbers will likely show that retail spending is now actually slowing. With inflation ticking up, consumers worried about a recession, and the Fed’s intent to destroy demand, we’ll likely see a pullback on consumer spending that could end in recession. Ultimately, decreased consumer demand and high inventories mean there should be some pretty good sales and discounts this year. – M.S.ECONOMIC WARNING INTSUMBullard: Fed must drive down demandIn an interview this week, St. Louis Federal Reserve Bank President James Bullard said it’s “fantasy” to think the Fed can tackle inflation through interest rate hikes. Instead, he says the Fed needs to go further in driving down consumer demand. “This [inflation] report just underscores the urgency that the Fed is behind the curve and needs to get moving… If markets and households get the idea that the Fed’s not going to do the right thing and not going to keep inflation under control, then you have to gain credibility by actually doing things that show them that you are serious.” (AC: Bottom line, Bullard is calling for putting people out of work. This is in line with former New York Fed President Bill Dudley, who last week said that the Fed needs to deflate the stock market to disrupt consumer psychology and get Americans to stop spending money. The picture I’m getting is that some at the Fed openly admit that inflation is a much larger problem than is being otherwise acknowledged. It also indicates how destructive the Fed might become. – M.S.)IMF on the global fragmentation risk International Monetary Fund Managing Director Kritalina Georgieva warned this morning of fragmentation of global governance into geopolitical blocs (such as those of the U.S. and USSR during the Cold War). Georgieva also warned that inflation would remain higher globally than previously forecast, and that higher energy and food costs, including food shortages, represent a “clear and present danger” to the world. The IMF will be downgrading global growth expectations for both 2022 and 2023. (AC: No major news here, other than to note that the IMF is discussing global fragmentation into western and eastern blocs that will drive trade realignment and increase the risk of a global conflict. – M.S.)Gundlach: “Potential calamity coming in 2023”