This week felt like a tug of war between optimism and caution.
In the US, retail sales surprised to the upside and consumer sentiment held up, giving bulls something to cheer about. But June’s inflation numbers told a different story. Core CPI ticked up to 2.9% YoY, keeping the Fed firmly in wait-and-see mode.
The global economy is still sending mixed signals, and last week was no exception.
In the US, growth is clearly losing steam, but inflation is proving hard to shake. The Fed’s preferred inflation gauge, core PCE, nudged up to 2.7% in May. That’s not the kind of number that pushes the Fed toward cutting interest rates anytime soon.
The latest US data gave a bit of a mixed signal. On one hand, the economy is clearly slowing down. But on the other, inflation – or the general rise in prices — is still hanging around.
This week’s economic data showed a mix of cooling inflation and slow-but-steady growth. In the US, the Fed’s preferred inflation measure – core PCE – rose just 0.2% in May, bringing the annual rate to 2.7%. That’s close to the Fed’s 2% target, supporting the idea that price pressures are easing. However, Americans are spending more cautiously: personal spending dipped for the second time this year, and consumer confidence fell sharply in June as worries about jobs and the economy grew. Jobless claims edged down slightly, suggesting the labour market is cooling gradually.
Last week’s macro backdrop showed cooling inflation but softening demand. US retail sales unexpectedly declined by 0.9% in May — the biggest drop in four months — hinting at consumers pulling back amid high rates and lingering price pressures.
