Daily update
Daily update
- May UK inflation data was as expected across the multiple measures released today. Headline consumer price inflation was 2%. The decline in inflation has almost nothing to do with government policy, and not that much to do with the Bank of England—a lot of this is the natural slowing of temporary inflation drivers. Durable goods prices sank further into deflation.
- The EU publishes its “naughty list” of countries with “excess deficits” (meaning countries that have breached the magic and relatively meaningless 3% deficit:GDP level). Media reports suggest seven countries will be listed, including France. Ahead of French parliamentary elections, some analysis suggests parties’ campaign pledges of new unfunded spending and tax cuts equate to almost two Trusses, nearly 4% of GDP.
- Yesterday’s US retail sales data was weaker than expected. It does not automatically mean weaker consumption. Retail sales are nominal, and falling goods prices will lower the number. Retail sales growth has also significantly underperformed consumer spending growth since the start of 2023, as consumers divert spending to fun.
- Markets rallied on the idea that slower consumption or disinflation forces should encourage the Federal Reserve to ease rates. Fed members have been asking for more signs of inflation slowing—but harmonized inflation is already below 2%.
