Continuing the Climb
While there is ample reason for optimism in the months ahead, many risks to the outlook remain as we continue the climb past peak growth and peak policy accommodation.
As progress continues in the battle against COVID-19, there is ample reason for optimism in the months ahead. But as we move past peak growth and peak policy accommodation, the recovery that follows will likely be uneven and multi-layered.
Special commentary on digitization efforts in Japan. A growing affordability problem in US housing. April retail sales fall in Canada. The BoE upgrades outlook but keeps a steady hand. Eurozone service activity accelerates. Japanese PMIs remain downbeat. Australia’s retail sales resilient despite Victoria lockdown.
The May CPI data exceeded expectations with headline and core CPI jumping 5.0% and 3.8%, respectively. Pricing power is a key differentiator today with consumers flush with cash willing to spend and firms choosing to pass on those costs to consumers. Eventually, the pass through of higher costs should slow. Yet the US Fed’s position that the current inflation spike is “transient” will not mean it is fleeting. On the policy front, the FOMC should officially begin taper discussions at its late-July meeting.