- According to the Bureau of Economic Analysis’ second estimate, U.S. real GDP growth decreased at an annual rate of 0.2% in Q1 2025, revised up slightly from the initial estimate of –0.3%.
- The Atlanta Fed’s GDPNow estimate for Q2 real GDP growth is 4.6% as of June 2nd, which would mark a significant bounce back from Q1. The rosy forecast was driven by a sharp rise in net exports due to expectations of moderating tariffs, as well as expected increases in personal consumption and private domestic investment.
- Inflation remained subdued in April with the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, rising just 0.1% from March, putting the annual inflation rate at 2.1%, its lowest reading in 2025. Core inflation, which excludes food and energy, was slightly higher at 2.5% annually.
- Consumer spending slowed sharply, increasing only 0.2% in April which was in line with consensus expectations but well below the 0.7% increase in March, while the personal savings rate jumped to 4.9%, indicating a more cautious consumer outlook.
- The May jobs report will offer a look at how the labor market is reacting to the rapidly changing trade environment. According to Bloomberg data, the report is expected to show 130,000 nonfarm payroll jobs added, down from the 177,000 added in April, and the unemployment rate holding steady at 4.2%.
- The S&P 500 gained 6.3% in May, its best monthly performance since November 2023, putting it within 4% of its record high from mid-February. The rally was driven by Info Tech (+10.9%), Communication Services (+9.6%), and Consumer Discretionary (+9.4%), reflecting a renewed risk appetite among investors.
- However, U.S. equities continue to lag international counterparts as a weaker U.S. dollar, which is down ~9% YTD according to the U.S. Dollar Index (DXY), contributes to the relative outperformance of non-U.S. securities.
- Treasury yields rose early in May, with 10-year Treasuries eclipsing 4.5% and the 30-year yield peaking above 5.0%, driven by inflation concerns and the U.S. losing its last triple-A credit rating from a major rating agency after being downgraded by Moody’s, before ending the month at 4.4% and 4.9%, respectively.
- Fed officials, keen on avoiding stagflation, continue to stress that they will remain cautious and data dependent as they consider future rate cuts despite President Trump’s public calls for cuts in the near-term.
