[ihc-hide-content ihc_mb_type="show" ihc_mb_who="10,13,14,16,18,19,20,21,22,23,24,25" ihc_mb_template="1"] 🇺🇸 United States: Conflicting Signals, But Momentum Persists Beneath the Surface The latest batch of U.S. macro data has bullish undertones but with a fair side of bearishness. While headline GDP for Q1 contracted -0.2%, this miss was already largely priced in, and forward-looking indicators suggest firmer ground ahead. The Atlanta Fed’s GDPNow model, often criticized for its volatility but increasingly watched for real-time sentiment, was revised up to 2.2% for Q2, hinting at a solid rebound already in motion. Consumer sentiment and behavior provide a sturdy backbone for this thesis. The Conference Board’s Consumer Confidence reading for May surged to 98.0—well above the 87.1 consensus—while personal income grew a surprising 0.8% in April, far outpacing the 0.3% forecast. Even more telling is the narrowing of the goods trade deficit to $87.6B from an expected $142.8B, suggesting improved external demand or tighter domestic consumption of imports—either way, a positive tilt for net exports. Inflation dynamics also merit attention. The Core PCE Price Index decelerated to 2.5% YoY, in line with the Fed's trajectory toward its 2% goal. The accompanying decline in Michigan 1-year inflation expectations—from 7.3% to 6.6%—suggests consumers are buying into this disinflation story. Crucially, this could give the Fed more room to ease policy later this year. Still, the market must contend with meaningful weaknesses. Durable goods orders dropped -6.3% in April, and initial jobless claims ticked up to 240K, hinting at some labor market softening. Corporate profits disappointed with a -3.6% fall in Q1, well below the 5.9% expected, raising concerns about margin compression. Housing is also flashing amber: pending home sales nosedived -6.3%, far worse than the -0.9% estimate. Yet, even amid these cracks, forward indicators like the Dallas Fed Manufacturing Index (-15.3 vs. -35.8 prior) show relative improvement, and the broader narrative remains one of resilience. The economy isn’t booming—but it’s also not breaking. In fact, it may be quietly stabilizing. 🇪🇺 Europe: A Delicate Turn as Confidence Flickers Amid Structural Softness Europe’s economy is trying to shake off stagnation, and the latest indicators offer glimpses of renewed momentum—particularly in consumer sentiment and select business surveys. German and French consumers appear to be regaining some confidence, with GfK’s German Consumer Climate improving to -19.9 and French confidence ticking up to -15.2. Italy, in particular, is emerging as a quiet bright spot: consumer and business confidence rebounded sharply in May, and Q1 GDP grew 0.3%, slightly above previous readings. There are also subtle improvements in broader sentiment metrics. The European Commission’s Business and Consumer Survey rose to 94.8 in May, from 93.8. Industrial and services sentiment edged up as well, suggesting stabilization in the private sector outlook. That’s reinforced by rising French non-farm payrolls (+0.3%) and improved consumer spending (+0.3%)—small gains, but notable considering the continent’s inflation and energy struggles in 2024. However, the cracks remain structural and persistent. Retail sales in Germany fell -1.1% in April versus expectations of a modest gain, and French CPI slipped -0.1%, pointing to very weak price momentum. The French PPI collapsed -4.3%, and the HICP rose just 0.6% YoY—raising fresh concerns about deflationary tendencies. More worryingly, labor market stress is resurfacing. Germany’s unemployment surged by 34,000—nearly triple the consensus—and total joblessness rose to 2.963 million. Add in the collapse in auto registrations across Italy (-19.2%), France (-9.8%), and Germany (-4.2%), and it’s clear that household demand is still on uncertain footing. Europe seems to be at an inflection point. The mood is improving, but hard data—especially in prices, labor, and consumer goods—suggests the bloc is still navigating through fragile terrain. With inflation falling but demand still muted, the ECB may soon have to weigh growth more heavily in its policy calculus. 🇨🇳 China: Signs of Stabilization, But Services Show Strain China’s economy continues to show tentative signs of stabilization, but not yet enough to suggest a convincing turnaround. May’s Manufacturing PMI rose to 49.5 from 49.0—a modest gain, but still below the 50 mark that separates contraction from expansion. This subtle uptick signals that industrial activity is no longer deteriorating at the pace seen earlier this year, perhaps helped by targeted stimulus and improving global trade flows. The broader Composite PMI also edged up to 50.4, just above the expansion threshold. This improvement, though slight, implies that the combined momentum from manufacturing and services is holding steady—if not accelerating. It supports the view that China is muddling through the post-COVID reset without slipping into outright recession. Yet the weakness in the service sector is a growing concern. Non-Manufacturing PMI came in at 50.3—lower than the 50.6 forecast—and barely above contraction territory. Given that China is relying more heavily on domestic consumption and services to rebalance its growth model, this stagnation is particularly troubling. If services lose traction, the policy levers become more limited, especially as property markets remain subdued and local governments are constrained by debt overhangs. In this context, the latest data reflects a cautious equilibrium: industry is no longer a drag, but services are failing to inspire. For policymakers, this means more stimulus—fiscal or monetary—will likely be needed to secure a true bottoming out. Investors should watch for moves to support domestic demand, as the next leg of China’s recovery will hinge less on exports and more on the strength of its own consumers. [/ihc-hide-content] [ump-visitor ] To unlock the content you need a Premium or Enterprise Account! [/ump-visitor]