US Consumer Spending Growth Slows While Inflation Remains Soft

Forex

Economic

Summary:

US consumers hit the brakes in April after the strongest month of spending since early 2023 while inflation remained tame, consistent with a slowing economy.

Inflation-adjusted personal spending rose 0.1% after rising 0.7% a month earlier, Bureau of Economic Analysis data showed Friday.

The personal consumption expenditures price index, excluding food and energy, increased 0.1% from a month earlier. Compared with a year earlier, the so-called core inflation gauge rose 2.5% from April 2024 — the smallest annual advance in more than four years.

The figures illustrate an undercurrent of anxiety among many American consumers about the economy after the weakest quarter for spending in nearly two years. While higher duties on imports have yet to show up more broadly in higher goods prices, sentiment has slumped and the outlook for personal finances stands at a record low.

The modest rise in spending reflected an increase in services that more than offset a decline in durable goods outlays.

At the same time, the Trump administration has walked back or paused some tariffs as negotiators work toward trade deals with key partners including China and the European Union. On Wednesday, a US court issued a ruling that blocks many of the import taxes.

Separate data out Friday showed a massive narrowing of the US merchandise-trade deficit in April on the largest-ever decrease in imports.

The constant state of flux in trade policy has nonetheless fueled uncertainty, with consumers’ spending attitudes hanging in the balance. Meanwhile, Federal Reserve policymakers will likely keep interest rates unchanged for the foreseeable future until they get more clarity on the impact of tariffs not only on prices but also on other pillars of the economy like the labor market and consumer spending.

Economists are paying close attention to the degree to which companies are passing through higher import duties to consumers. A measure of goods inflation that excludes food and energy climbed 0.3%.

While many companies have so far been absorbing or offsetting much of the hit from tariffs, retailers including Walmart Inc. and Macy’s Inc. have indicated Americans will start seeing price hikes soon.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Glendon

Commodity

Analysts have revised down their oil price forecasts for the third consecutive month as swelling OPEC+ supply and lingering uncertainty around the impact of trade disputes on fuel demand weigh on prices, a Reuters poll showed.

A survey of 40 economists and analysts in May forecasts Brent crude will average US$66.98 per barrel in 2025, down from April’s $68.98 forecast, while U.S. crude is seen at $63.35, below last month’s $65.08 estimate. Prices have averaged roughly $71.08 and $67.56 so far this year respectively, as per LSEG data.

While tensions have somewhat eased between the U.S. and other trade partners, trade conflicts still loom as a key factor that could weaken oil demand, said Tobias Keller, analyst at UniCredit.

“On the supply side, oil prices will be heavily influenced by OPEC+ production decisions, while geopolitical tensions... pose ongoing risks of disruption and price volatility,” Keller added.

Eight OPEC+ members began unwinding output cuts earlier this year, agreeing to larger-than-expected increases of 411,000 bpd for May and June. The members may decide on a similar output hike for July at a meeting on Saturday, sources have told Reuters.

The move “seems driven by a desire to punish non-compliant members rather than support oil prices at any specific level. Compliance will be hard to enforce, especially in Kazakhstan,” said Suvro Sarkar, lead energy analyst at DBS Bank.

Meanwhile, analysts polled by Reuters expect global oil demand to grow by an average of 775,000 barrels per day in 2025, with many pointing to elevated trade uncertainty and the risk of economic slowdown as key concerns. This compares to the 740,000 bpd 2025 average demand growth forecast from the International Energy Agency earlier this month.

With U.S. consumption and China oil demand constrained by fuel efficiency gains, economic uncertainty and the shift to electric mobility, “demand growth is largely coming from the resource nations themselves,” said Norbert Ruecker, head of economics & next generation research at Julius Baer.

Meanwhile, Russia’s war in Ukraine continues to pose a geopolitical risk premium for oil. Analysts say markets have largely priced in the uncertainty.

“Potential de-escalation efforts and the possibility of lifting sanctions on Russian oil could further lower prices,” said Sarkar.

Source: BNN BIoomberg

Risk Warnings and Disclaimers

Add to Favorites

Michelle

Economic

A legal fight over US tariffs adds another layer of uncertainty for global commerce, as the Trump administration continues to pursue its protectionist trade policy.

If a ruling by the Court of International Trade blocking President Donald Trump’s “Liberation Day” tariffs succeeds, it would bring the average US tariff rate down to 6%, according to Bloomberg Economics. That’s higher than the roughly 2% when Trump took office, but far below the near 27% reached last month. That would certainly be a smaller shock to the economies of the US and its trading partners, Bloomberg Economics’ chief economist Tom Orlik wrote in a note.

The problem is that there’s no way of knowing what happens next. A federal appeals court offered a temporary reprieve on Thursday, setting up for a long legal fight that could wind up at the Supreme Court. Despite the ruling, countries continue to negotiate with the US for bilateral deals including Taiwan and Japan. And even if current tariffs eventually get blocked, the administration is already looking at other options that would keep levies high.

One such tool is Section 122 of the Trade Act of 1974, which would enable the president to impose sweeping tariffs of as much as 15% on imports from countries with which the US runs a “large and serious” balance-of-payments deficit. Economists said that would be the fastest workaround, even though it would require congressional approval after 150 days.

Markets reflected that uncertainty as US and Asian shares fell, with an initial burst of optimism about the ruling meeting a growing sense that tariffs would find their way in somehow.

After digesting the major surprise from the Court of International Trade’s ruling, several economists said they won’t change their baseline assumption on tariffs rates — meaning they’re not going to change their economic forecasts in a meaningful way.

Bloomberg Economics and Deutsche Bank both have a baseline assumption that tariffs will end up around 15%. The administration is counting on revenue from elevated import levies to offset some of the costs of the fiscal package currently in front of Congress. “Abandoning tariffs altogether is therefore not an option,” Deutsche Bank economists wrote.

There could still be some nuanced economic implications, including the risk of fueling inflation, according to Bloomberg Economics’ Anna Wong. Optimism about lower tariffs could prompt consumers to spend more on recreation services, she wrote in a note, and businesses to boost import orders.

Paying workers to move actually pays dividends. Tulsa, Oklahoma, wanted to attract more people to live and work in the city so it started giving Americans $10,000 to relocate. A new study shows that the initiative — replicated by about 100 other places across the US — was worth it, providing $4 for every $1 spent.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Glendon

Economic

Forex

The European Union has gained leverage in trade talks with the United States after a U.S. court cast doubt on the legality of Washington's "reciprocal"tariffs, EU officials said on Friday.

A U.S. federal appeals court temporarily reinstated President Donald Trump's tariffs on Thursday, a day after a U.S. trade court ruled that Trump had exceeded his authority in imposing the duties and ordered an immediate block on them.

"The uncertainty as to the legality of the 'reciprocal' tariffs certainly gives us extra leverage," one EU official close to the talks said. "The talks will continue, as formally we still look for zero-for-zero tariffs."

The EU was willing to discuss some non-trade barriers with the U.S., EU officials said, but would not touch the EU's taxation system — such as the value added tax or digital tax — or food safety standards.

The EU officials said the uncertainty created by the court rulings and the Trump administration's tariff policy had a positive aspect for Europe, which was seen by markets as an oasis of stability in comparison.

"This is the watchword: uncertainty. It is impossible to know what the status of the tariffs will be next week, not to mention next month," one of the EU officials said.

"If you want sane, stable, even boring, rules-based order and predictable business environment, Europe is the place for you."

Meanwhile, some European companies, worried over the uncertainty and possible major hits to their business, are holding their own talks with U.S. authorities.

VolkswagenCEO Oliver Blume said his company was holding "fair" and "constructive" talks with the U.S. government on tariffs and wanted to make further investments in the country.

Blume, speaking to German newspaper Sueddeutsche Zeitung, said that Volkswagen's main contact in Washington was U.S. Commerce Secretary Howard Lutnick.

Earlier this week, sources told Reuters that Germany's carmakers were in talks with Washington over a possible tariff deal.

The European Commission conducts all trade negotiations on behalf of the 27-nation bloc and companies, or even individual EU countries, cannot legally get a deal outside that framework.

EU-US TRADE TALKS

The European Commission would not comment on the U.S. court rulings because they were internal U.S. procedures.

But it said trade talks between Brussels and Washington would continue, with Europe sticking to its offer of mutual zero tariffs on industrial goods.

"There's no change in our approach, we proceed as planned with both technical and political meetings next week," a Commission spokesperson said.

EU Trade Commissioner Maros Sefcovic in a post on the X social media platform said he held a phone call with Lutnick on Friday.

"Our time and effort fully invested, as delivering forward-looking solutions remains a top EU priority. Staying in permanent contact," Sefcovic said on X.

More trade talks between the U.S. and the EU are scheduled for next week, on the sidelines of the OECD Ministerial Council Meeting in Paris on June 3-4.

The EU officials said the U.S. courts' rulings validated the EU view that the sweeping "reciprocal" tariffs, imposed on all goods from the EU and many other countries around the world on April 2, were unjustified.

They also said that while U.S. courts did not question Washington's 25% tariffs imposed on European steel, aluminium and cars, the rulings could also play a role in the EU's efforts to get those tariffs lowered or removed.

Source: TradingView

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Political

Musk’s Enthusiasm Meets Political Reality

Elon Musk’s high-profile involvement in the Trump administration’s push for government efficiency has ended in disappointment, underscoring the complexities of bureaucratic reform and the limits of Musk’s influence in the political arena. Musk, known for his successful ventures at Tesla and SpaceX, was appointed to lead the "DOGE" commission, which aimed to downsize the U.S. federal bureaucracy. The commission, which initially garnered attention for its bold goals, is now seen as a failure, with Musk stepping down from his role and returning to his business interests.

President Trump’s praise for Musk’s commitment, calling him a “real patriot,” contrasts sharply with the reality that bureaucratic reform is far more difficult than Musk or Trump anticipated. Despite Musk’s aggressive plans to overhaul government agencies, the initiative ultimately ran into significant resistance from both Congress and entrenched interests within the government.

The Challenges of Bureaucratic Reform

The DOGE commission, which aimed for massive reductions in government spending and agency closures, was always a challenging proposition. Reforming the sprawling U.S. bureaucracy, which involves the complex interplay of laws, regulations, and political interests, proved to be more difficult than Musk’s experience in the private sector had prepared him for. As Musk himself conceded, the mission of DOGE was ultimately too big to be accomplished through a commission without real legislative backing.

The commission’s goals were ambitious, initially seeking up to $2 trillion in savings, but Congress was unwilling to pass the necessary legislation to bring about these sweeping cuts. Instead, the budget and tax-cut bill passed by the House of Representatives only contained modest cuts to government agencies, significantly below the targets set by Musk and his team.

Trump’s Role and the Failure of DOGE

One of the key failures of the DOGE initiative was Trump’s lack of follow-through. While he was quick to support Musk’s idea, Trump did not provide the necessary political capital or legislative backing to ensure its success. As a result, the burden of executing the reforms fell squarely on Musk, without the support of a willing Congress or the administration’s full commitment to seeing the work through.

Musk’s frustration with the process became evident as he criticized the failure of the proposed cuts to materialize, noting that the planned reductions in government spending and the bureaucracy were ultimately ineffective. The lack of significant action on these reforms led Musk to step away from the project, signaling that the ambitious agenda was unlikely to move forward in any meaningful way.

Musk’s Return to Tesla and SpaceX

Musk’s departure from DOGE marks a shift back to his core businesses, where his focus on innovation and leadership has yielded significant success. Despite his failure to reform the federal bureaucracy, Musk’s private sector ventures, particularly Tesla and SpaceX, continue to thrive. However, his involvement with Trump’s government efficiency efforts, and his subsequent retreat, highlights the limits of applying private sector strategies to the inherently political and fragmented nature of government operations.

As Musk re-engages with Tesla and SpaceX, his brief venture into government reform serves as a reminder of the complexities involved in attempting to overhaul a system that operates under very different rules from the companies Musk is accustomed to managing. The failure of DOGE also underscores the challenges of ambitious policy agendas that lack the necessary political and institutional support.

Elon Musk’s involvement in the DOGE commission has ended with a sense of unfulfilled potential, as his vision of a leaner U.S. government has not come to fruition. This episode highlights not only the challenges of bureaucratic reform but also the limitations of private sector influence in government, where political realities and entrenched interests often thwart even the most well-intentioned efforts. As Musk returns to his core business ventures, the legacy of DOGE will likely be remembered as an example of how even the most ambitious reform plans can falter without strong political backing and institutional cooperation.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Michelle

Economic

Forex

Bank of England (BoE) policymaker Alan Taylor downplayed the recent spike in inflation and reiterated his support for lower interest rates, citing mounting risks to growth from U.S. President Donald Trump’s trade policies.

In an interview with the Financial Times published Friday, Taylor said April’s unexpectedly high 3.5% inflation reading was driven largely by “one-time tax and administered price changes” rather than broader “demand and supply pressures.” The jump followed a 2.6% rate in March.

Earlier this month, the BoE trimmed its inflation outlook, now expecting it to peak around 3.5% in the third quarter—slightly below the 3.75% forecast previously.

The central bank also estimated that the U.S. tariffs would shave 0.2 percentage points off U.K. inflation in two years and reduce the size of the economy by 0.3% over three years.

Taylor and fellow Monetary Policy Committee member Swati Dhingra voted for a larger 50-basis-point cut at the BoE’s May meeting, when the central bank ultimately opted for a more cautious 25-basis-point reduction, bringing rates to 4.25%.

"I’m not going to pre-emptively announce my vote, but I think I indicated in my dissent that I thought we needed to be on a lower (monetary) policy path," Taylor told the FT.

His concerns around global trade have intensified, he added, especially after a U.S. appeals court reinstated Trump’s tariffs following a ruling that the former president overstepped his authority.

“I’m seeing more risk piling up on the downside scenario because of global developments,” he said, warning that the tariffs’ impact on trade and growth would “be building up over the rest of this year in terms of trade diversion and drag on growth.”

Taylor’s remarks stood in contrast to the more measured stance taken by BoE Governor Andrew Bailey, who said in a speech Thursday that a “gradual and careful” approach to future rate cuts remained appropriate given ongoing uncertainty around global trade and inflation.

Meanwhile, U.K. finance minister Rachel Reeves is set to unveil a multi-year public spending plan on June 11, as the government faces pressure over the state of public finances.

Source: Investing

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Argentina's $1 Billion Bond Sale: A Step Toward Stability, but with High Risks

Argentina’s recent $1 billion bond offering marks a significant milestone in its financial recovery, signaling a cautious return of investor confidence. This marks the country’s first major bond sale in seven years, following a period of triple-digit inflation and economic turmoil. Despite the positive reception, the bond sale comes with a hefty 29.5% yield, which is much higher than expected and reflects lingering concerns about Argentina's economic trajectory. The offering, which is denominated in pesos, highlights the country’s struggle to regain its footing in the global financial markets while managing inflationary pressures.

President Javier Milei, who has worked to reduce government spending and secure a $20 billion loan from the International Monetary Fund (IMF), faces the challenge of proving that Argentina’s recovery is sustainable. Inflation has dropped significantly from over 270% to near 50% over the past year, and despite nearly 40% of the population living below the poverty line, Milei’s fiscal austerity measures have not caused a major political backlash. However, the country still owes around $300 billion, with $60 billion of that in dollar-denominated international bonds. A return to dollar-denominated financing is essential to solidify the recovery and meet future debt obligations.

Investor Confidence Mixed, but Important Milestone for Refinancing

The bond auction received demand 1.7 times the $1 billion cap, indicating some support from investors. However, the high yield indicates significant apprehension about Argentina's future. The 29.5% yield exceeded initial expectations of 25%, signaling that investors are still cautious about Argentina’s ability to stabilize its economy. The option for investors to sell back the bonds after two years offers some flexibility but reflects underlying concerns about long-term stability.

Economist Gustavo Ber and investment firm BTG Pactual view the bond sale as a “savvy move” that will help Argentina meet its future dollar-denominated commitments. However, analysts such as Armando Armenta from AllianceBernstein argue that additional steps are needed to ensure Argentina’s long-term financial health. Specifically, Armenta stresses the importance of foreign direct investment and central bank efforts to meet net international reserve accumulation targets. These measures could pave the way for Argentina to access dollar-denominated sovereign debt markets in the near future.

Challenges in Peso-Denominated Debt and Inflation Concerns

Despite the success of the bond sale, concerns remain about the sustainability of Argentina’s peso-denominated debt. Local debt prices fell, and the 10-year local note yield rose to 27%, up from 26%. Clyde Wardle from HSBC highlighted that these high yields may become problematic if inflation continues to decrease sharply, as they could prompt the government to print more pesos to meet debt obligations, exacerbating inflation. With the peso having fallen approximately 9% against the dollar since capital controls were loosened in April, the risk of further currency devaluation remains significant.

Local brokerage Puente also pointed out that the high yield on the bond does not reflect strong confidence in the future evolution of Argentina’s exchange rate or overall economic stability. With Argentina’s promise to the IMF to add $4.4 billion to its reserves by mid-June, analysts are skeptical about meeting this target, especially given the challenges in increasing the country’s foreign reserves.

Outlook and Risks for Argentina's Economic Future

Despite the positive move of the bond sale, the challenges facing Argentina’s economy are far from over. The country’s ability to maintain investor confidence in future debt issuances will depend on its success in meeting IMF targets, stabilizing inflation, and ensuring economic growth. HSBC’s Wardle emphasized that Argentina’s capacity to issue affordable dollar-denominated debt remains limited, given the uncertainty surrounding the country’s growth prospects.

In conclusion, while the bond sale represents an important step in Argentina’s financial recovery, the high yields and ongoing economic challenges underscore the uncertainty that investors still feel about the country’s future. Argentina’s leaders will need to implement further reforms and meet fiscal and monetary targets to avoid further economic instability and ensure continued investor confidence.