Trump raises tariff demands in EU trade talks to 15-20% - FT
The government’s second-quarter GDP report scheduled for later this month is still on track to post a moderate recovery in output, based on the median estimate for a set of nowcasts compiled by CapitalSpectator.com.
Today’s revised Q2 nowcast indicates a 1.7% increase, according to the median.
The estimate is unchanged from the previous update on July 8. The Bureau of Economic Analysis is scheduled to publish its initial Q2 GDP data on July 30.
Yesterday’s rebound in retail sales for June supports the nowcast by suggesting that economic recovery for the crucial consumer sector was relatively strong at the end of Q2.
“Don’t count the American consumer out yet,” Heather Long, chief economist at Navy Federal Credit Union, wrote in commentary on Thursday. “There’s still a lot of trepidation about tariffs and likely price hikes, but consumers are willing to buy if they feel they can get a good deal.”
The second half of the year could be more challenging, however. A key uncertainty is how tariffs evolve following President Trump’s Aug. 1 deadline for new trade deals. The question of what happens next revolves around how or if inflation will change due to tariffs, and how the Federal Reserve reacts, or doesn’t.
This week’s consumer inflation report for June suggests that tariffs may be at an early stage of raising pricing pressure, which could persuade the Fed to maintain or raise rates rather than cut.
US consumer inflation’s 1-year pace picked up in June. The consumer price index rose 2.7% at the headline level vs. the year-ago level, up from 2.4% in May, according to the Bureau of Labor Statistics — the highest increase since February. Citing tariffs as a factor, “Inflation is going kick into a much higher gear in coming months,” said Mark Zandi, chief economist at Moody’s.
Michael Wolf, an economist at Deloitte Touche Tohmatsu Limited, also expects higher inflation ahead due to tariffs. “I think that higher prices are coming even though the macro-data, through May, has not reflected that yet. In a sense, that isn’t surprising,” he said this week. “I wouldn’t have expected firms to pass on the higher costs immediately. But as time passes, and as inventories dwindle, there is only so long you can hold out.”