Sales data, which will be released at 8:30 am Eastern time by the Department of Commerce, will show whether consumers returned to buying all the big ticket items such as cars, appliances and furniture, as well as necessities such as clothing and food in June. Consumer spending, which makes up more than two-thirds of the US economy, is an important part of the national economy.
In the meantime, a closely watched consumer index released by the University of Michigan at 10 a.m. will give economists an idea of how Americans are feeling about the economy. Consumer sentiment fell sharply in June, with many Americans worried about long-term inflation.
“We’re in this weird period where you want the economy to slow down. You don’t want it to reverse,” said Jason Furman, an economics professor at Harvard University. “There’s a lot of strange uncertainties that we don’t often see.”
The looming question is whether the US economy will shrink again in the second quarter of 2022, after unexpectedly contracting in the first three months of the year. The next batch of domestic products will be released on July 28.
“After flying above ground last year, an inevitable slowdown in economic growth is underway,” Wells Fargo economists wrote in a note Thursday. “The stability of policy followed by inflation suggests that the recession is more serious than next year.”
There is a mix of signals in trading. On Thursday, the nation’s two largest banks, JPMorgan Chase and Morgan Stanley, reported lower profits in part due to smaller mergers and initial public offerings on Wall Street. JPMorgan also said it is putting cash aside to protect against potential losses in the event of a downturn. However, its CEO, Jamie Dimon, said Americans are better equipped to deal with the financial crisis than they were before the financial crisis.
For families, finances are very difficult. Americans are facing higher prices for everyday necessities such as food, gas and housing. New inflation figures released on Wednesday showed that prices rose by 9.1 percent in the past year, exceeding economists’ expectations and putting more pressure on the Fed to move more aggressively to stabilize the economy.
There are also growing fears that a sharp move by the Fed could cause the US economy to collapse.
“It’s hard to find much positive news in the latest inflation report,” said Karen Dynan, an economist at Harvard University and an economist at the Federal Reserve Board. “This was the most important point that the Fed will get before its meeting this month, and it will have to intervene more strongly than it expected to reduce the demand. And it also brings the possibility that it will not be able to do without lowering.”
The June inflation report raised questions about whether Fed officials will move more to curb inflation at their upcoming meeting. Inflation took another hit last month, dampening any hope that the Fed’s moves so far are lowering rates.
For weeks, policymakers have been leaning toward another three-quarter hike, mirroring the increase they received in June. But it was not clear whether they would begin to show support for the rise in sufficient numbers before their July 26-27 policy meeting.
So far, the authorities seem to be sticking to their original message. And if that’s the case, he cautions against jumping to one bucket of data. On Thursday, Christopher Waller, a member of the Fed’s Board of Governors, said that although the latest report on consumer prices was a “major league disappointment,” there were risks of interfering with policy decisions.
“You don’t want to overdo it,” Waller said. “Going 75 miles is too much. Don’t think because you’re not going 100, you’re not doing your job.”
The message was confirmed by the President of St. Louis Fed’s Jim Bullard, who told Nikkei Asia that his preferences were sticking to a three-quarters of a percent hike for now. San Francisco Fed President Mary Daly he told the New York Times that while he expects a brutal inflation report, he still favors a three-quarter increase.
The assistant is Atlanta Fed President Raphael Bostic, who does not have a vote on the Fed’s policy committee this year. When asked about the possibility of a full hike on Wednesday, Bostic told reporters that “everything is in play.”