STOP: The Summer Slowdown Is Already in Motion

Hard Data vs. Hard Truths: A Closer Look at Summer 2025 Risks

While headlines trumpet strong 1Q25 earnings and resilient hard data, anyone looking ahead can see the signs are unmistakable:

The U.S. economy is heading straight toward a summer slowdown — and perhaps into a recession.

Thanks to 1Q25 earnings calls, this week's Federal Reserve Beige Book, and Apollo Global Management's insightful research (led by Chief Economist Torsten Slok) - the evidence is piling up.

Forward-looking indicators are deteriorating sharply, even as lagging metrics offer a misleading sense of calm.

Beige Book and Earnings Calls: Pervasive Uncertainty Is Freezing Activity

"I spoke with a customer is a pipe manufacturer the other day and who is -- has been working through what would be a pretty interesting acquisition for them. And his comment was if I do the deal today and they were close to getting a deal done, I'm either a hero or an idiot. And I don't like decisions where there are binary outcomes. So the first thing is there just has to be some certainty on -- as it relates to M&A-related activity in the capital markets. it's just very difficult if you're evaluating a major investment like that to make it in an environment where it's not clear what the rules of the road are going to be." – Fifth Third Bancorp ($FITB ) President Timothy N. Spence

"While our corporate and consumer clients are resilient and in good financial health, the world is in a wait-and-see mode and is facing a more negative macro outlook than anyone had anticipated at the beginning of the year. And we know that prolonged uncertainty generally hurt confidence. The changes underway globally will go beyond trade and tariffs." – Citigroup ($C ) CEO Jane Fraser

"At this stage, most of our clients are adopting a wait-and-see approach, and it is difficult to provide any concrete assessment of how significantly this might affect demand from our customers in our major markets around the world." – ManpowerGroup ($MAN ) CEO Jonas Prising

This week's Beige Book drives the message home:

• Economic activity across most Districts is flat or declining.

• Manufacturing is weakening or stagnant.

• Non-auto retail sales are softening.

• Travel and leisure are notably weaker, especially international tourism.

• Construction and CRE are slowing amid tariff-driven cost spikes.

Most alarmingly, uncertainty tied to tariffs and policy is causing businesses to pause investment, hiring, and expansion.

This is not business as usual. It is the classic pattern seen before past recessions.

Earnings Are Strong — But Earnings Reflect the Past

Yes, the first quarter showed sturdy corporate earnings, boosted by still-solid consumer demand and healthy labor markets. But let's be clear: earnings are a rearview mirror measure. They capture the economy as it was — not where it's headed.

The economy is moving — and not in a good direction.

Comment in Fifth Third Bancorp's earnings call puts it nocely

Torsten Slok’s April 2025 Apollo slides present a deeply concerning picture:

Consumers Are Stressed, Not Strong

Surface-level consumer spending data may look fine — for now — but digging deeper, the cracks are growing:

• Consumer sentiment is plunging across income levels.

• The share of credit card accounts making minimum payments is rising.

From Container Ships to Pink Slips: How the Slowdown Will Hit

A timeline developed by Apollo Chief Economist Torsten Slok vividly illustrates how the current slowdown is likely to unfold. Starting with the imposition of "Liberation Day" tariffs on April 2, container traffic from China to the U.S. has begun to slow sharply.

With a typical 20–40 day transit time, disruptions at U.S. ports are expected to surface by early to mid-May, followed swiftly by a halt in trucking demand as goods fail to arrive.

By late May and early June, companies will be facing empty shelves, falling sales, and the first waves of layoffs in the trucking and retail sectors.

If history is any guide, by Summer 2025, recession may no longer be a forecast — it may already be a reality.

Once again, the machinery of trade and logistics is providing early warning signals that policymakers and investors ignore at their peril.

The Fed Is Aware — But Reaction May Come Too Late

Federal Reserve officials, including Governor Waller and Cleveland Fed President Hammack, have acknowledged the brewing weakness:

"Once the data turn decisively softer, lower policy rates will be appropriate."

The catch?

"It may take some time before enough data accumulate to convince Fed officials."

In other words, the Fed may wait for rearview mirror confirmation — by which time the slowdown could already be entrenched.

Meanwhile, consumers rushing to beat tariffs could briefly inflate April's data, further obscuring the downturn.

Conclusion: Prepare for the Summer Storm

When truck sales collapse, orders dry up, capex gets shelved, and consumers cling to their credit cards — it’s no longer a question of if a slowdown will occur. It’s a matter of when and how deep.

Businesses, lenders, and investors should prepare now:

• Tighten risk controls and stress-test scenarios.

• Prioritize liquidity, resilience, and flexibility.

• Avoid being lulled by strong backward-looking data.

  
  

The storm clouds are no longer forming on the horizon. They’re overhead.