Weekly economic commentary: Global economic signals remain mixed

Summary

United States: Stag before flation

• Data are beginning to point toward more of the growth-dampening effects of tariffs (i.e., the "stag") hitting before the price effects (i.e., the "flation"). This week's data dump suggests a weaker first half of the year for U.S. growth, and the narrative of an unshakable consumer is in question.

• Next week: ISM Manufacturing (Tue.), ISM Services (Thu.), Employment (Thu.)

International: Tentative growth and tempered inflation: Global economic signals remain mixed

• This week, June composite PMI figures for the Eurozone and United Kingdom signaled a tentative but ongoing recovery, although growth remains fragile. On the price front, Canada's underlying inflation held broadly steady, while Australia’s inflation figures surprised to the downside. Turning to emerging markets, in an expected move, Mexico’s central bank Banxico cut its policy rate to 8.00%, though it signaled a more cautious approach toward further easing.

• Next week: China PMIs (Mon.), Japan Tankan Survey (Tue.), Eurozone CPI (Tue.)

Interest rate watch: "Well positioned to wait"

• During testimony before Congress this week, Fed Chair Powell defended his wait-and-see approach to monetary policy despite mounting pressure to do so. We look at the difference between comments by the Fed Chair and those made by various members of the Board of Governors in this week's Interest Rate Watch.

Topic of the week: Everything was not as it seemed

• The first two prints of GDP showed an economy that was slowing but not yet collapsing. While growth in consumer spending was weaker than the previous quarter, personal consumption was still expanding. Prospects looked better for Q2 growth, as a drop in good imports of roughly $60 billion in April looked to set up trade to be a boost to growth. However, data printed this past week have changed the story.

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