Read the highlights of this week’s commentary from Helios:
- The Federal Reserve’s preferred inflation measure, the core personal consumption expenditures (PCE) price index, rose by 0.2% in April, marking the smallest increase of the year. Inflation-adjusted consumer spending declined by 0.1%, due to reduced spending on goods and softer services expenditure. Specifically, spending on services spending edged up by only 0.1%, while spending on merchandise declined by 0.4%. Real disposable income dropped by 0.1% in April, contributing to the economic slowdown, while the saving rate remained at 3.6%, the lowest since late 2022.
- In May, US consumer confidence unexpectedly rose for the first time in four months to a sentiment index of 102, up from April’s revised 97.5 and exceeding all forecasts. This increase was fueled by improvements in business conditions and the labor market, with the index of present conditions climbing for the first time since January and the expectations measure seeing its largest jump since last July. Nonetheless, this uptick in confidence is moderated by persistent inflation, record household debt, and a softening job market, all exacerbated by the Federal Reserve’s high interest rates.
- The Bloomberg Dollar Spot Index dropped over 1% in May, its first monthly loss since December, as easing inflation raises expectations of a rate cut by year-end. Despite previous expectations for continued high rates, traders now forecast only a quarter-point cut following April’s moderated core inflation.
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