Barclays Warns: ’Negative Summer Seasonality’ Is Looming

Consumers' worst fears about tariff-induced inflation have receded, though they are still wary of price increases to come, according to a University of Michigan survey Friday.

The university's closely watched Survey of Consumers for July showed overall sentiment increased slightly, rising 1.8% from June to 61.8, exactly in line with the Dow Jones consensus estimate and at its highest level since February. Questions on current conditions and future expectations produced monthly gains as well.

On inflation, the outlook at both the one- and five-year horizons both tumbled, falling to their lowest levels since February, before President Donald Trump made his "liberation day" tariff announcement on April 2.

The one-year forecast plunged to 4.4%, down from 5% in June and well off the 6.6% level in May, which was the highest reading since late 1981. For the five-year outlook, the expectation slid to 3.6%, down 0.4 percentage point from June.

"Both readings are the lowest since February 2025 but remain above December 2024, indicating that consumers still perceive substantial risk that inflation will increase in the future," survey director Joanne Hsu said in a statement.

Indeed, the respective outlooks in December were for 2.8% and 3%, largely in line with readings throughout 2024, before Trump took office in January.

Worries peaked over inflation as Trump levied 10% across-the-board tariffs as well as so-called reciprocal duties that he has backtracked on pending negotiations. However, in recent days he has announced tariffs on individual products such as copper, raising the specter of future price increases.

The readings are below their long-term averages, with the headline sentiment index down 6.9% from a year ago and 16% from December. The expectations reading fell 14.8% from July 2024, though the current conditions index was 6.5% higher.

Source: CNBC

President Donald Trump has looked to the marble finishes and hefty price tag of the Federal Reserve headquarters to claim grounds to fire Chair Jerome Powell, with whom he has tussled for years over interest rates. But the extensive use of marble in the building is, at least in part, the result of policies backed by Trump himself.

As the Fed moved forward with plans to renovate its Great Depression-era headquarters in Washington during Trump's first term, it faced concerns in 2020 during a vetting process involving Trump appointees, who called for more “white Georgia marble” for the facade of building.

The Fed's architects said the central bank had wanted glass walls to reflect the Fed as a transparent institution, but three Trump appointees to a local commission felt marble best fit the building's historic character. Marble was added as a result, according to the minutes of the Commission of Fine Arts, which advises the federal government on architecture.

The marble does not explain the roughly $600 million in cost overruns for the Fed headquarters and another nearby office building, now budgeted to cost $2.5 billion, which also includes the addition of an underground parking garage and new glass atria in the building's courtyards. But the roots of its extensive use further muddies the White House's attempts to use the renovation to paint the central banker as profligate spender as a possible pretext to removing him.

“I wouldn’t be surprised if the result costs more” because of the added marble, said Alex Krieger, a Harvard University emeritus professor who was a member of the commission and participated in hearings on the Fed’s proposal.

Russ Vought, Trump's top budget adviser, cited “premium marble” in a letter to Powell last week as an example of the “ostentatious overhaul.”

In a response late Thursday, Powell wrote that the project would “use new domestic marble" for several reasons, including "to address concerns raised by external review agencies."

The National Capital Planning Commission, which also reviewed and approved the Fed renovation project, has started an inquiry into how Powell oversaw the updates.

“The Federal Reserve’s extravagant multi-billion dollar renovation happened on the watch of the Fed’s leadership, and the Fed’s leadership needs to own up for this mismanagement of taxpayer dollars – as well as its botched coverup job,” said White House spokesman Kush Desai. A Fed spokesperson declined to comment.

There is an uncomfortable possibility that the fate of the U.S. central bank and its foundational role in the economy hinges on a dispute about renovation costs and architecture, one that could lead a broader legal battle as to whether Trump can dismiss a Fed chair he dislikes after the Supreme Court in May described the institution as having protections against an abrupt firing.

Source: Yahoo Finance

Consumer sentiment ticked higher in July, marking two consecutive months of improved shopper attitudes as businesses navigated President Donald Trump’s latest tariff threats targeting dozens of countries. The fresh reading matched economists’ expectations.

The recent resurgence of consumer sentiment followed six straight months of worsening attitudes, according to University of Michigan survey data released Friday. Before the swell of optimism, consumer sentiment had fallen to near its lowest level since a bout of inflation three years ago.

Despite the new data, the measure of consumer sentiment remains 16% lower than where it stood in December, before Trump took office.

Year-ahead inflation expectations dropped for a second consecutive month, declining from 5.0% in June to 4.4% this month, the survey data showed. The anticipated inflation level would still mark a major increase from the current year-over-year inflation of 2.7%.

The new report on consumer sentiment came a day after the release of retail sales data that showed unexpectedly strong performance in June. Robust shopper appetites last month suggested that the uncertainty surrounding Trump’s tariffs hadn't prompted households to stash extra income.

Consumer spending, which accounts for about two-thirds of U.S. economic activity, is a key bellwether for the outlook of the nation’s economy.

So far, key measures of the economy have largely defied fears of a tariff-induced downturn. The unemployment rate stands near a historically low level and job growth remains robust, though it has slowed from previous highs. Inflation has climbed over the last two months but it remains below where it stood when Trump took office.

Some analysts expect price increases to accelerate over the coming months as tariffs take hold, though many have acknowledged that the path forward remains unclear amid Trump's fluctuating policies.

Typically, importers pass along a share of the tariff-related tax burden in the form of higher costs for shoppers. A host of major retailers, including Walmart and Best Buy, have warned of potential price hikes as a result of Trump's levies.

Trump has rolled back many of his steepest tariffs over recent months, including a sky-high levy on China, the top source of U.S. imports. In recent days, however, Trump announced plans to slap tariffs as high as 50% on dozens of countries, including 25% tariffs on top U.S. trade partners such as Japan and South Korea.

The fresh levies are set to take effect on Aug. 1. In addition, a proposed 50% tariff on copper imports could intensify the impact of the country-specific levies.

Source: Yahoo Finance

The pre-2011 Syrian economy, while facing structural challenges, was that of a lower-middle-income country with a functioning industrial base, a significant agricultural sector and nascent potential in tourism and services.

That reality was devastated by 14 years of war, violence and sanctions, emerging into a drug-based Captagon economy. Its gross domestic product contracted by more than 50 per cent from its pre-war peak (by 83 per cent if one uses night-time light estimates) between 2010 and 2024.

Half the pre-war population has been forcibly displaced, representing lost generations of economic output and potential. About two-thirds of the current population lives in poverty (earning less than $3.65 per capita a day), and more than half the population faces food insecurity.

The directly visible indicator of the devastation was the collapse of the local currency (from 47 Syrian pounds per US dollar in 2010 to 14,800 by the end of 2024), as growing budget deficits were financed by the monetary printing press and people shifted into foreign currencies to hedge against near-hyperinflation.

The removal of US sanctions and of Syria’s "designation as a state sponsor of terrorism” is strategically important. The decision was followed by the EU passing legislation to lift all sanctions, thereby enabling Syria's reintegration into the international economic and financial community.

The Gulf and other Arab countries are steadily bringing Syria back into the fold, restoring long-disrupted economic and financial relations. Saudi Arabia and Qatar have settled Syria’s arrears to the World Bank, pledged to fund public sector restructuring and rebuild energy infrastructure, signed agreements for major infrastructure and power projects, and the resumption of airline services. Iraq has reopened a main border crossing, and DP World has signed an $800 million deal to develop Tartus Port.

Sanctions removal allowed for Syria's renewed participation in the SWIFT payment system, reactivating formal channels for international trade, remittances and financial flows, delivering a powerful antidote to the scenario of hyperinflation and a dominant illicit sector.

The removal unlocks a multistage recovery process, sequentially addressing the critical deficits in liquidity, capital and strategic infrastructure investment that currently paralyse the country.

Transparent reforms urgent

However, the success of this pathway will be contingent on the implementation of credible and transparent, domestic, structural and institutional reforms.

Syria needs a comprehensive IMF programme and support from the Arab Monetary Fund and Gulf central banks (possibly through central bank swaps and trade financing lines).

The institutions of the central bank, banking supervision and AML/CFT need to be rebuilt. A new monetary and payment system has to be established.

The banking and financial sector has to be restructured, and banks recapitalised, while allowing for private banks (including foreign) to re-emerge. The Syrian pound should stay floating until macroeconomic stability has been restored, including through fiscal reform and access to international finance for trade.

Importantly, the government and central bank need to rebuild the statistical system for evidence-based policymaking; one cannot govern, reform, regulate and manage what one does not know.

Removal of sanctions will allow transfers and remittances through formal channels from the large Syrian expatriate community, a lifeline for returning families, as well as financing reconstruction of housing and businesses.

Restoring the banking system means less reliance on the use of cash – helping to revive the formal economy as compared to the dominant informal economy, and also combating money laundering and terrorist finance associated with the production and trade of drugs. Remittances and capital inflows would allow the Central Bank of Syria to rebuild its foreign currency reserves, stabilise the forex market and restore monetary stability to control inflation.

The removal of sanctions will also lower the prohibitive risk premium associated with Syria and open the country for the much-needed foreign direct investment to stabilise the economy, and for broader reconstruction funding.

The Damascus Securities Exchange, now operational again, could evolve from a symbolic entity into another channel of financing, allowing the government and Syrian businesses to tap into local and international capital for the first time since 2009.

Tapping energy potential

The country’s substantial, largely unexploited, onshore and offshore oil and gas reserves could become an important source of reconstruction finance and job creation. Strategically and importantly, the removal of sanctions would allow oil and gas pipelines to be reopened, and new ones built; pre-civil war, Syria produced up to 400,000 barrels a day of crude versus between 80,000-100,000 bpd this year.

Reactivating existing wells and oil export infrastructure could become a major source of revenue and foreign exchange, dramatically improving Syria's fiscal position and its ability to reconstruct the devastated country, and bring in international funding.

New pipelines linking oil and gas from the Gulf (notably Qatar, Kuwait and Saudi) and Iraq to the Mediterranean would provide a strategic alternative to maritime routes through the Straits of Hormuz and Red Sea.

Azerbaijan and Syria signed a preliminary agreement on July 12, pledging co-operation in the energy sector – to enable export of gas from Azerbaijan to Syria, through Turkey – and help in rebuilding Syria’s energy infrastructure.

Over the medium and longer term, a new, transformative energy infrastructure and map linking the hydrocarbon-rich regions of the Gulf and Iraq to the Mediterranean coast can be developed: a major building block in stabilising and helping to redevelop Syria.

The lifting of sanctions is a critical initial step supporting Syria in emerging from a vicious cycle of destruction, economic collapse and illicit activity into a virtuous circle of reconstruction, redevelopment, regional and international reintegration.

The realisation of this road map requires a commitment from Syria to undertake essential reforms in governing, the rule of law and institutional transparency. Only then can the country hope to attract and retain the human and financial capital needed to rebuild its economy, regain investor trust, and reclaim its historic role at a vital geostrategic crossroads.

Source: THENATIONALNEWS

Barely two weeks after the world’s No. 1 economy enacted a fiscal package judged by many economists to leave the US on an unsustainable borrowing path, No. 4 is holding an election with its own budget dangers.

Japan’s Liberal Democratic Party, which once held near monopoly power over national politics, and its current coalition partner are at risk of losing their majority in the upper house of parliament. Polls ahead of Sunday’s ballot have shown the coalition losing steam in the final days.

Prime Minister Shigeru Ishiba already lost majority control of the more powerful lower house last October. A setback in the second chamber would put pressure on the administration to compromise with other parties.

“A loss of majority by the LDP coalition could place additional pressure on fiscal policy, as the opposition parties’ manifestos are largely focused on fiscal expansion,” Japan markets researchers Ikue Saito and Junya Tanase wrote in a note Thursday — expressing a view held by many.

Japan’s biggest bank lobby was so worried about some of the election pledges that it warned this week about the potential of a further downgrade of the nation’s sovereign credit rating.

Opposition party leaders have played down concerns over plans to cut taxes, arguing that their plans are fiscally sustainable. Among their arguments: lower sales taxes will boost spending and growth, supporting budget revenue down the line.

The Trump administration has made much the same argument about the “one big beautiful bill” enacted earlier this month.

Whether financial markets buy the argument remains to be seen. With Germany also tilting toward fiscal expansion, there are increasing demands being made on bond investors the world over.

In Japan, yields lately have been on a tear. Benchmark 10-year government rates hit the highest since 2008 this week, while yields on 30-year bonds hit the highest level since their 1999 debut.

Further moves in Japan raise the risk of ripple effects across the globe. If the government does lose its majority on Sunday, JPMorgan’s Saito and and Tanase said that the outcome would likely be “higher US Treasury yields impacted by the steepening of the Japanese government bond curve.”

While many economies use the standard of two consecutive quarters of negative economic growth to define a technical recession, the US waits for the Business Cycle Dating Committee of the National Bureau of Economic Research to make the call. That can often come too late to be useful for policymakers, businesses and households, so a cottage industry has grown around building early recession indicators.

In a NBER working paper, economist Pascal Michaillat has outlined an algorithm using unemployment and vacancy data to come up with a new real-time recession detector. The bad news: It puts the odds of the US already being in recession at 71%.

“Overall, the algorithm developed in the paper shows that labor market conditions characteristic of a recession are not on the horizon — they are already here,” Michaillat wrote in the paper.

Source: Bloomberg Europe

In Japan, rice isn’t just food — it lies at the heart of the nation’s culture and identity. Even the emperor himself grows rice for sacred rituals.

But ever since it started disappearing from store shelves last year and prices reached new highs, rice has also become a flashpoint for public frustration.

Long lines formed for stockpiles released by the government to ease the shortage. Convenience store Lawson jumped on the trend to sell \ balls using grain from an old harvest. And an agriculture minister was ousted after a joke about never having to buy rice – a gaffe that struck a nerve amid inflation.

The crisis can be traced back to 2023 when a sweltering summer hit harvests just as an influx of tourists put pressure on demand. But long-held government policies effectively capping output and discouraging imports have made it tough to remedy the problem.

Even US President Donald Trump seized on the issue in ongoing tariff talks, accusing the country of being “spoiled” and slamming its rice import policies.

Now, as Japan heads to polls this Sunday, rice is also at the center of a political gambit.

Prime Minister Shigeru Ishiba from the Liberal Democratic Party is attempting to win over inflation-squeezed urban voters. He’s leaning on Agriculture Minister Shinjiro Koizumi, who in just two months slashed prices by bypassing long-standing distribution networks and challenging agricultural cooperatives.

The rice shortage has eased and prices have dropped about 16% since May (though they still remain 50% higher than a year ago). But as that provided some relief to consumers, it has angered farmers, with some openly considering voting against the party that had long protected them.

It wouldn’t be the first time that food and farming has stirred up voter sentiment. In the past few years, a wave of farmer discontent has shaken up politics from Europe to India, while high grocery prices featured prominently in elections including that in the US last year.

And even as the cost of living, pension reform and planned tax cuts are other top issues for Japanese voters, rice has become a symbol of the strain on households. The results of the Sunday election will tell whether the intervention from the ‘rice minister’ was enough to secure the government’s future.

Flipping burgers won’t be cheap during the next few months, argues Bloomberg Opinion’s Javier Blas. Record beef prices may sound counterintuitive when vegetarianism seems to be on the rise, but the problem is supply. The world is running out of calves while ranchers face much higher rearing costs — due to more expensive feed and costs of meeting animal welfare regulations.

Source: Bloomberg Europe