Q1 GDP was revised up slightly to +0.8%. “After a sluggish performance in the first quarter, the U.S. economy is getting back on track,” said Sara Johnson, senior research director at IHS Global Insight. Reuters noted that “a sharp upward revision to income growth and a rebound in corporate profits in the first quarter brightened the picture.” The news prompted Chris Rupkey, chief economist at MUFG Union Bank in New York, to advise that “this gives us more confidence that growth will hit its marks in the second quarter … enough forward speed for the Fed to continue with its gradual pace of rate hikes.”
Consumer sentiment increased in May to the highest level in a year, according to the preliminary data for the The University of Michigan’s index. “The increase could drive greater economic growth, as a more optimistic consumer is typically more likely to spend,” AP noted.
Fed Chair Janet Yellen on Friday said that “it’s appropriate — and I’ve said this in the past — for the Fed to gradually and cautiously increase our overnight interest rate over time.” Speaking on Monday, St. Louis Fed President James Bullard said that “my sense is that markets are well-prepared for a possible rate increase globally.”
Looking ahead to this Friday’s official US employment report for May, Otto Waser, chief investment officer of R&A Group Research & Asset Management, said that “the payroll data is probably the key figure that will shape the Fed decision.”
Larry Summers, former Treasury secretary and onetime economic adviser to President Obama, told the New York Times last week that “the odds are better than 50-50 that we will have a recession within the next few years.”
Consumer inflation in the Eurozone fell in May, marking the fourth month in a row that inflation has been flat or negative in the month-over-month comparison, Eurostat reported. Meantime, German unemployment fell to a record low in May. Note, however, that retail spending in Germany fell for a second month in a row in April.