The US showing signs of a potential early recession and Nike skids after warning from stronger dollar and higher discounts.

US GDP readings

According to the Bureau of Economic Analysis estimates, the US economy shrank by 0.6% during Q2 of this year (cnn.com). This matches the most recent GDP data as it shows the economy was in contraction for the first half of the year as companies had to readjust to pandemic-era supply chain interruptions. This asks the question, was the US in a recession? As the country experienced two consecutive quarters of negative growth. However, many policymakers and economists reject the claims of an early 2022 recession as they highlight consumer spending, robust job growth and manufacturing (cnn.com).

The BEA has said that Thursday’s third estimate of Q2 GDP is based on more ‘complete’ data than what was available last month, and reflects upwardly revised levels of federal government spending, business fixed investment and consumer spending cnn.com). Although, Gross domestic income, another way of measuring the earnings and costs sustained in production, was revised downward by $47.4 billion to $305.7 billion (cnn.com).

Canada's GDP MoM

Canada’s GDP expanded by 0.1% in July beating predictions of an imminent decline, as growth in agriculture, oil and gas sector and mining offset shrinkage in manufacturing. Statistics show that the economic output from the oilsands sector rose by 5.1% during the month, which was a change in direction after two consecutive months of decline (cbc.ca).

The forestry, agriculture, fishing and hunting sector led growth with 3.2%. Much better than the likes of the US and Europe as both are facing drought conditions. On the downside, the manufacturing sector decreased by 1.9%, making it the smallest output for retail since December (cbc.ca). According to economist Derek Holt, the performance of Canada’s economy throughout the fiscal year (3.6% growth in Q1 and 4.2% so far in Q2), remains one of the best in the world (cbc.ca).     

Nike earnings

The world’s largest sportswear brand joined others in warning of a blow from a rapidly strengthening dollar and ramped up discounts after its earnings on Thursday. Nike’s shares, already one of the worst performing Dow Jones members for the year, fell 10% (investing.com). Analysts believe that substantial markdowns are a given this year throughout the holiday season, however going into 2023, inventories will be much lower after the holiday sell-through as well as the post-holiday sales (investing.com).

Overall inventories spiked 44% to $9.7 billion towards the end of Q1 at Nike, while it rose 65% in its biggest market of North America (investing.com). However, the thriving demand for Nike’s brands such as converse and Jordan has slowed, as footwear lovers lose enthusiasm for such optional products due to the rising costs of living crisis. Finally, the company’s net income fell 20% to $1.47 billion, or 93 cents per share, in the three months ended August 31^st (investing.com).