Real personal consumption expenditures rose +0.3% m/m in May, but it wasn’t enough to keep the y/y rate from sliding from +2.8% to +2.7%. Disposable income also rose +0.3%, pushing the y/y rate up from +2.2% to 2.3%. The consumer didn’t provide much to Q1 GDP, and will have to at least keep up May’s pace for Q2 GDP to show strength. In the same report core inflation remained tepid at +1.6%, still below the Fed’s +2.0% target. The manufacturing sector continued on a downtrend as the June ISM manufacturing index fell from 52.1 to 51.7 points, the lowest in almost three years. The critical new orders component fell from 52.7 to 50, right at the breakeven level between expansion and contraction, and the lowest level in 42 months. Six of the 10 components are now at or below 50. Tariffs were a major concern of the survey respondents, and while trade tensions eased over the weekend as Presidents Trump and Xi met, a comprehensive trade deal with China is likely far away.
