US Weekly Prospects

Research evidence excerpt

US Weekly Prospects

basis for that conclusion

weren’t clear, he mentioned expectations and may have been

6.0 referring to a recent drop in inflation breakevens, along with

the decline in oil prices. He also noted the Fed’s dual mandate

5.5 when discussing price stability; markets had earlier taken note

of the absence of the maximum employment objective in his

5.0

first press conference.

4.5

15 17 19 21 23 25 27 Taking stock of late 2Q developments

Source: BLS, J.P. Morgan

The release of the final June business surveys next week

Figure 3: Private average hourly earnings along with many pieces of June activity data will allow us to

%oya refine our 2Q GDP tracking and better assess where we may

7 be headed in 3Q. To the extent that there are some downside

risks to our 2Q GDP forecast, that might create reasons to 6 Excluding education

5 and health raise 3Q from its present 1.5% estimate. In particular, we cur-

4 rently assume that inventories increased in 2Q given the sig-

nal from the manufacturing surveys and the fact that invento- 3

ries have been falling for so long. But hard data through May 2

suggest another drop in 2Q, and so any inventory rebound 1 Education and health

may get pushed into 3Q. One caveat is that the manufacturing 0

15 17 19 21 23 25 27 surveys, while still going strong, did pull back slightly in

Source: BLS, J.P. Morgan June, with the PMI continuing to emphasize that the Middle

East conflict could have pulled forward some activity.

If lower participation runs up against robust labor demand,

that should start to translate into improving wage growth as A positive trajectory for consumer spending also is shaping

firms raise salaries in a bid to attract workers back. We fore- up heading into the end of the quarter. Auto sales rose