US CPI Inflation, Retail Sales, Consumer Confidence: Macro Week Ahead
US CPI Inflation, Retail Sales, Consumer Confidence: Macro Week Ahead
By:Ilya Spivak
Stocks may find trouble the markets still want more rate cuts just as the Fed gets a reason for delay
- Stock markets have idled so far in July, but the battered US dollar is recovering
- US CPI data now in focus as markets and the Fed clash on rate cut expectations
- Retail sales and consumer sentiment data may show why markets want easing
Stock markets stalled last week, with the bellwether S&P 500 and the tech-tilted Nasdaq 100 down 0.4% and 0.5% respectively. Prices have idled in a narrow range since surging in thin trade after a seemingly solid US jobs report on July 3. Treasury bond yields edged higher at the long end of the curve and held steady at shorter-term maturities.
Gold and crude oil prices continued to edge higher, though neither made meaningful progress on trade development. The yellow metal has languished in a range for the better part of three weeks, while the benchmark WTI contract continues to digest after an eye-watering plunge of nearly 12% as fears about an escalating US-Iran conflict faded.
The US dollar has continued a quiet recovery, adding 0.6% against the euro and 1.7% against the Japanese yen. The currency suffered historic losses in the first six months of the year. An average of its value against major counterparts fell 9.5% from January through June, marking the worst losses since the back half of 1991.
Against this backdrop, here are the key macro waypoints to consider in the days ahead.
US consumer price index (CPI) data
Inflation is expected to have moved higher in the US last month. The headline consumer price index (CPI) is penciled in for a rise of 2.7% year-on-year, while the core measure excluding volatile food and energy prices returns to 3%. Taken together, that would mark the fastest price growth in four months.
An elevated CPI reading would bolster the case for inaction at the Federal Reserve, where Chair Powell and company have resisted market and White House calls for easing. The markets price in 104 basis points (bps) in rate cuts through the end of 2026, while the US central bank forecasts a more modest 75bps.
US retail sales data
A modest rise of 0.1% in US retail sales is expected when June’s data comes across the wires this week. While that would amount to a modest improvement from the 0.9% decline in May, the absence of a spirited push to front-run incoming tariff hikes slated for August would be glaring.
Consumption is the overwhelmingly dominant driver of US economic growth, accounting for close to 68% of gross domestic product (GDP). Tariff-induced anomalies in imports and inventories aside, first-quarter growth data showed a worrying small contribution on this front, coming in at the weakest in almost two years.
University of Michigan (UofM) consumer confidence survey
If the rise in retail sales proves to be as soggy as economists anticipate, another uptick in consumer confidence slated to appear in a closely watched survey from the University of Michigan (UofM) this week would tell a very different story than meets the eye. It would seem doubly troubling if calming consumers’ nerves is not translating into demand.
The headline sentiment gauge jumped to a four-month high in June as ebbing tariff-related fears brought consumers’ one-year inflation expectations down from an eye-watering peak of 6.6% in May to 5%. That is still very high compared with November’s cycle low of 2.6%, but nevertheless a move in the right direction.
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