Weekly Market Recap
PCE inflation accelerated to 4.1% year-over-year in May—its highest since April 2023—with core PCE at 3.4% YoY, the steepest since October 2023. Personal income and outlays each rose 0.7% for the month, ahead of consensus, per the Bureau of Economic Analysis.
US inflation stays above target
The BEA reported the headline PCE price index up 0.4% in May, matching April, while core PCE rose 0.3%. Spending gains were broad-based—financial services and insurance, health care, housing and utilities, and energy goods led the move.
- Headline PCE YoY: 4.1% (highest since April 2023)
- Core PCE YoY: 3.4% (highest since October 2023)
- Personal income: +0.7% MoM
- Personal consumption: +0.7% MoM
The S&P Global Flash PMI composite climbed to 52.2 in June from 51.5—the highest in five months. Manufacturing PMI rose 0.6 points to 55.7, its strongest reading since May 2022. Services PMI advanced to 51.3 from 50.7. Employment, however, contracted for a second straight month as firms tightened cost control, and supply chain delays linked to tariffs and the Middle East conflict kept input price inflation at historically elevated levels. The BEA also revised Q1 real GDP growth up to 2.1% annualized from 1.6%, with the revision driven by lower imports; consumer spending was trimmed. Q4 2025 real GDP stood at 0.5%.
Europe and UK: divergent signals
The ECB's consumer survey showed 12-month eurozone inflation expectations easing to 3.5% in May, a three-month low. Respondents still expect the economy to contract 1.7% over the next year, though that is an improvement from the 2.2% decline projected in April. Oil moving back toward pre-conflict levels could reduce pressure on the ECB to raise rates further.
Across the Channel, UK data points the other way. The CBI Distributive Trades Survey put retail sales volumes at a weighted balance of -54 in the year to June, down from -46 in May. The manufacturing order book fell to -45, the weakest since 2020 and below the -35 consensus. Wholesale sales remained soft. UK Prime Minister Keir Starmer resigned this week; Andy Burnham is currently expected to take the Labour leadership.
Risk snapshot
- Rate path: Sticky US PCE narrows the window for near-term Fed easing; eurozone trajectory stays data-dependent.
- Real wages: Income up 0.7% against headline prices up 0.4% leaves real wage growth thin—prioritize short-duration fixed income and laddered bond exposure.
- Macro risk: Tariff-linked supply delays and elevated input prices keep margin compression live; defensive sector tilts warrant a quarterly review.