The stock market seems to be carefree. Investors likely figure that any signs of slower economic growth increase the odds that the Fed will ease. Plus, inflation remains remarkably subdued through May notwithstanding Trump's tariffs. June's CPI inflation rate is tracking around only 2.6% y/y according to the Cleveland Fed's Inflation Nowcasting model. The dollar's weakness is viewed as boosting corporate earnings. And stock investors probably figure that if the bond market doesn't seem to care much about the deficit-bloating potential of Trump's Big, Beautiful Budget Bill, why should they? "Summertime, and the livin' is easy," as the song goes from Porgy and Bess.
The regional business surveys conducted by five of the 12 Fed district banks suggest that the national manufacturing purchasing managers index (M-PMI) will be below 50.0 again during June when it is reported tomorrow morning (chart). It's been mostly below 50.0 since November 2022, yet real GDP has continued to grow over this period.
The five regional business surveys show that their average prices-received and prices-paid indexes stopped rising during June, after rising sharply early this year (chart). But inflation measures based on the CPI, PPI, and PCED have remained subdued. We reckon that's because while Trump's tariffs might have increased the prices of some imported goods, inflation remained subdued for most nondurable goods and services made in America.
In an interview today with CNBC's Jim Cramer, Amazon CEO Andy Jassy said the retail and tech giant hasn't seen significant price increases, and he explained why as follows: "We did a lot of forward buying several months ago, and then a lot of our sellers, our third-party selling partners, forward deployed a lot of inventory to avoid some of the issues with the uncertainty around where tariffs are going to settle," he said. "And we have, so far, not seen prices appreciably go up."
