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Eurozone PPI falls -0.6% mom in May, weak pipeline inflation

    Eurozone PPI fell -0.6% mom in May, in line with market expectations, as falling energy costs drove the decline. On an annual basis, PPI decelerated from 0.7% to 0.3% yoy. Energy prices dropped -2.1% mom on the month, while prices for intermediate goods slipped -0.1% mom. In contrast, prices for durable and non-durable consumer goods rose 0.3% mom and 0.2% respectively mom. Excluding energy, producer prices still edged up 0.1% mom.

    Across the EU as a whole, PPI also fell -0.6% mom and eased to 0.4% yoy. Among member states, Bulgaria saw the sharpest monthly drop at -3.7%, followed by Greece (-1.9%) and Finland (-1.8%). A handful of countries including Cyprus (+1.0%) and Latvia (+0.1%) registered modest price gains.

    Full Eurozone PPI release here.

    ECB’s Lagarde urges reforms to boost Euro’s global standing

      ECB President Christine Lagarde said Euro can only rival the US Dollar’s dominance in global finance if European Union leaders commit to improving productivity and internal efficiency. In an interview with German broadcaster ARD, Lagarde called on EU policymakers to reduce trade barriers within the bloc and simplify regulatory frameworks.

      “Political leaders need to engage to make our economy more productive and more efficient,” she said, adding that such steps are essential for Euro to become the world’s leading currency.

      Lagarde also reiterated that interest rates in the Eurozone are now “in a good place” following June’s deposit rate cut to 2.00%. She emphasized ECB’s full commitment to its 2% inflation target.

      Japan household spending surges 4.7% yoy in May, fastest in nearly three years

        Japan’s household spending rose 4.7% yoy in May, sharply above expectations of 1.2% yoy and marking the fastest pace of growth since August 2022. Seasonally adjusted monthly spending also surged 4.6% mom, well ahead of the 0.4% mom consensus and the strongest gain since March 2021. The internal affairs ministry attributed the jump to robust demand for cars, dining out, and summer-related appliances.

        By category, transportation and communications spending soared 25.3% yoy, while recreation and leisure climbed 11.1% yoy. Furniture and home appliance purchases rose 9.3% yoy as households prepared for a hot summer. Food spending, which accounts for nearly a third of total consumption, rose 1.0% yoy as price pressures eased and dining out increased.

        Officials highlighted that the three-month moving average of household spending has remained positive since December 2024, suggesting a durable recovery in consumer demand.

        Fed’s Bostic sees prolonged inflation from tariff impact

          Fed’s Raphael Bostic signaled strong resistance to near-term rate cuts, citing uncertainty around trade policy and a still-resilient US economy. “This is no time for significant shifts in monetary policy,” he said, emphasizing that the FOMC should avoid decisions it may be forced to “quickly reverse”. With macro conditions steady, Bostic sees “space for patience” while waiting for greater clarity.

          The Atlanta Fed chief pushed back on assumptions that the economic impact of Trump administration’s tariff and fiscal policies would be “a short and simple one-time shift in prices”. Instead, he argued that the adjustment process will likely take a year or more, and that both prices and growth may respond in drawn-out, non-linear ways. The implication is that the economy may undergo a “longer period of elevated inflation readings” as it digests structural shifts.

          Bostic remains at the cautious end of the FOMC, projecting just one rate cut this year—compared to the median forecast of two.

          US ISM services rebounds to 50.8 in June, implies 0.7% annualized GDP growth

            US ISM Services PMI bounced back into expansion territory in June, rising to 50.8 from 49.9 in May, and slightly ahead of expectation of 50.3. While the headline marked a return to growth, it remained below the 12-month average of 52.4.

            Looking at some details, new orders jumped to 51.3 from 46.4, suggesting some revival in demand, while business activity improved from 50.0 to a solid 54.2. However, others details of the report were more mixed. The employment component slumped to 47.2 from 50.7y, signaling contraction in service-sector hiring. Prices paid remained elevated at 67.5, marking the seventh straight month above 60.

            According to ISM, the June PMI level implies an annualized GDP growth of around 0.7%.

            Full US ISM services release here.

            US: Payroll Gains Decelerate in June

              Non-farm employment increased by 147k in June, well above market expectations for a gain of 106k. Job gains for the prior two months were also revised higher by roughly 16k jobs.

              Over the past three months non-farm payrolls gained an average of 150k jobs, roughly equal to the twelve-month average.

              Private payrolls rose 74k, with most of the gains concentrated in health care & social assistance (+58.6k).

              In the household survey, the increase in civilian employment (+93k) came up against a declining labor force (-130k), pushing the unemployment rate down by 0.1 percentage points (ppts) to 4.1%. Meanwhile, the labor force participation rate ticked down by 0.1 ppts to 62.3%.

              Average hourly earnings (AHE) were up 0.2% month-on-month (m/m) – halving May’s gain. On a twelve-month basis, AHE ticked down to 3.7% (from 3.8% in May), with the three-month annualized rate falling 0.5 ppts to 3.1%.

              Aggregate weekly hours fell 0.3% m/m after remaining unchanged over the past two months.

              Key Implications

              The June gain in non-farm payrolls outpaced expectations considerably, as non-cyclical sectors including health care and government carried the report. While federal payrolls continued to decline in June, state & local government payrolls recorded its largest gain in two and a half years. Absent this spike, the employment report would have come in roughly on-par with expectations. This combined with the cooling in average hourly earnings is indicative of a stable but slowing labor market, which we expect to gradually apply upward pressure to the unemployment rate through the second half of the year.

              For its part, the Federal Reserve is unlikely to be deterred from their current patient stance on monetary policy given the stability of overall employment trends. This gives the Fed time to continue to assess developing inflation dynamics under tariffs. Market pricing currently expects the Fed to cut rates twice before year-end, with a first cut expected in September.

              US NFP growth solidly by 147k in June, wage pressures ease

                US non-farm payrolls rose 147k in June, above the expected 110k and broadly in line with the 12-month average of 146k. Unemployment rate unexpectedly dropped from 4.2% to 4.1%, helped in part by a small dip in the participation rate to 62.3%. Overall, the data suggest that the labor market remains stable, with no clear signs of deterioration that would force the Fed’s hand in July.

                However, wage growth continues to cool. Average hourly earnings rose just 0.2% mom and 3.7% yoy, both missing expectations of 0.3% mom and 3.9% yoy, and marking a further moderation from prior readings. This combination of solid hiring and easing wage pressure may support the case for a rate cut later in the year, but is unlikely to shift the Fed’s stance in the near term.

                Full US NFP release here.

                ECB accounts: June rate cut as safeguard against prolonged inflation undershoot

                  ECB’s June meeting minutes revealed that “almost all members” supported the 25bps deposit rate cut to 2.00%. Policymakers viewed the move as a safeguard to ensure “temporary undershoot in headline inflation did not become prolonged”, ensuring the 2% target remains intact through 2027. The cut was also framed as positioning rates in “broadly neutral territory,” giving the ECB room to maneuver in either direction as needed.

                  While some officials initially favored leaving rates unchanged to allow more time to assess inflation outlook, they ultimately aligned with the majority view. One member, however, dissented. The majority concluded that delaying a cut increase the risk of “undershooting the inflation target in 2026 and 2027”.

                  Overall, the ECB emphasized the need for full flexibility going forward. Given elevated global uncertainty and potential for rapid changes in inflation dynamics in both directions, the account stressed a “two-sided perspective” on inflation risks and a deliberate avoidance of forward guidance.

                  Full ECB meeting accounts here.

                  UK PMI services finalized at 52.8, a 10-month high

                    UK PMI Services was finalized at 52.8 in June, up from May’s 50.9, marking the fastest pace of expansion since August 2024. Composite PMI also rose to 52.0, the highest since September. The data signals a modest but broadening recovery, driven by improving domestic demand. S&P Global’s Tim Moore noted that consumer and business spending showed signs of a turnaround after a sluggish spring.

                    However, the rebound was tempered by “shrinking export sales”, with survey respondents citing pressures from US tariffs and geopolitical uncertainty. Additionally, firms were “reluctant to turn on the hiring taps”, marking the ninth straight month of job shedding.

                    For the BoE, input cost inflation slowed noticeably, helping to ease pressure on output prices, which saw their weakest rise in over three years. With price pressures softening and labor markets cooling, today’s report strengthens the case for the BoE to deliver another rate cut in August.

                    Full UK PMI services final release here.

                    Eurozone PMI services finalized at 50.5, significance of services inflation receding into the background

                      Eurozone PMI Services was finalized at 50.5 in June, up from 49.7 in May. Composite PMI ticked up to 50.6 from 50.2. Although the bloc returned to modest expansion, performance remained uneven across major economies. Germany hit a three-month high at 50.4, while France fell to 49.2. Ireland, despite slowing to a five-month low, remained the strongest performer at 528. Spain (52.1) saw a slight pickup, while Italy’s reading slipped to 51.1.

                      Cyrus de la Rubia of Hamburg Commercial Bank noted that the services sector has been “more or less stagnant” since April. Nevertheless, Persistent labor shortages have discouraged firms from cutting jobs, helping stabilize private consumption. But a full recovery still looks elusive, with structural weaknesses continuing to weigh on growth momentum across much of the bloc.

                      Notably, rising input and output prices in services could be an unwelcome sign for the ECB. However, de la Rubia emphasized that broader disinflationary forces, such as Euro strength and tariff-driven downside risks, may outweigh the uptick in services inflation. While price pressure in services remains on the radar, it’s significance is “receding somewhat into the background”.

                      Full Eurozone PMI services final release here.

                      Swiss CPI returns to positive territory at 0.1% yoy in June

                        Swiss consumer prices surprised slightly to the upside in June, with headline CPI rising 0.2% mom and turning positive on an annual basis at 0.1% yoy, reversing May’s -0.1% yoy print. Core CPI also firmed to 0.6% yoy from 0.5% yoy, suggesting that underlying inflation pressures remain subdued but stable.

                        Domestic prices were the key driver, up 0.2% mom and 0.7% yoy. Imported goods remained weak—flat on the month and still down -1.9% yoy despite an improvement from May’s -2.4% yoy.

                        Full Swiss CPI release here.

                        NFP report could tip scale in politicized Fed debate over rate cuts

                          The June US Non-Farm Payrolls report lands today at a moment when the Fed is facing increasingly overt political pressure. President Donald Trump has ramped up calls for rate cuts, and two Fed governors—Christopher Waller and Michelle Bowman—are aligning with that view. Both have recently suggested that a rate cut this month is on the table, and both are seen as potential candidates to replace Jerome Powell. That political backdrop is raising the stakes for today’s data.

                          So far, Fed Chair Jerome Powell and the broader FOMC have pushed back against moving too soon, emphasizing the need to assess incoming information, particularly on inflation and tariffs. However, if today’s jobs data weakens materially, Fed could face tremendous pressure from Trump’s political orbit.

                          Consensus expects a moderate 110k rise in payrolls, unemployment ticking up to 4.3%, and wages growth at 0.3% mom. But recent indicators—ADP’s unexpected -33k drop, soft ISM employment, and a rising four-week average of jobless claims—suggest the risk is skewed toward a downside surprise. A shocking print under 100k could provide fresh ammunition for those lobbying for immediate action, both inside and outside the Fed.

                          Markets still only price around a 25% chance of a July cut, with September seen as more likely. But if today’s NFP misses badly, that calculus could change fast.

                          China’s Caixin PMI services PMI falls to 50.6, but composite returns to growth

                            China’s Caixin PMI Services dropped to 50.6 in June from 51.1, missing expectations of 51.0. However, the broader PMI Composite rose from 49.6 to 51.3, marking a return to growth territory driven largely by stronger manufacturing activity. Caixin’s Wang Zhe noted that while supply and demand both improved, the rebound remains uneven and fragile.

                            Still, the data suggest mounting challenges. Employment continued to contract, and firms were forced to cut selling prices at the fastest rate in over a year, squeezing profitability despite stable input costs. Optimism weakened amid ongoing uncertainty, with business sentiment falling below its long-term average.

                            Full China’s Caixin PMI services release here.

                            BoJ’s Takata sees “True Dawn” for Japan, urges caution but not pessimism on tariffs

                              BoJ board member Hajime Takata said in a speech today that Japan may finally be emerging from decades-long economic stagnation. Reflecting on the structural decline since the 1990s, driven by the collapse of the bubble economy and intensifying global competition, Takata noted that while firms built resilience through deleveraging and restructuring, this also entrenched a low-investment, low-wage, and low-price “norm”.

                              Takata argued Japan is “finally beginning to break free of this norm”. Recent shifts in corporate pricing and wage behavior suggest Japan could be on the cusp of a sustained recovery. Still, he warned that US tariff policies risk derailing progress, recalling how similar global shocks in the 2000s repeatedly interrupted Japan’s economic revivals.

                              Yet’s Takata’s confident that this time could mark a “true dawn” and emphasized that being “overly pessimistic also poses a considerable risk”. He noted that the BOJ should maintain its accommodative stance for now, but also continue “gradually and cautiously” transitioning policy as conditions allow. Japan, he said, has a history of enduring far more intense trade tensions and should avoid falling into excessive pessimism.

                              Full speech of BoJ’s Takata here.

                              Japan’s PMI composite finalized at 51.5, recovery fragile on sluggish demand

                                Japan’s private sector posted modest gains in June, with the final PMI Services index rising to 51.7 from 51.0 and the Composite index improving to 51.5 from 50.2 in May. The latest data signalled continued expansion, though momentum softened compared to the first quarter. S&P Global’s Annabel Fiddes noted that second-quarter PMI readings suggest a slowdown in GDP growth.

                                “Demand conditions remained sluggish” as new business rose only fractionally for the second month, and new export orders continued to decline. Firms are still struggling to gain traction amid US tariff uncertainty.

                                Meanwhile, inflationary pressures persisted. Businesses reported “strong cost pressures”, partly due to rising staffing levels. These costs were passed on through quicker hikes in output prices, despite muted demand.

                                Full Japan PMI services final release here.

                                Fed’s Barkin downplays ADP miss, needs more data before acting

                                  Speaking to Fox Business, Richmond Fed President Tom Barkin dismissed alarm over the unexpected drop in ADP employment, saying he’s more focused on the unemployment rate in Friday’s jobs report. With joblessness steady around 4.1% to 4.3% for over a year, Barkin suggested “that all feels like a pretty stable range”. He also noted that slower job growth must be seen in context with a cooling labor force, particularly as immigration flows ease.

                                  Asked whether a weak payrolls figure could prompt the Fed to cut rates in July, Barkin avoided specifics and emphasized that the decision would depend on a broader set of inputs. “There’s more we’re going to learn,” he said, citing upcoming inflation data, tariff developments, and the pending tax bill. His remarks signal continued caution inside the Fed, even as market expectations lean toward a cut by September.

                                  Despite recent data noise, Barkin remained cautiously optimistic. “What I see is a solid economy — not a strong economy — but a solid economy, one where people are not yet pulling back,” he said.

                                  US ADP shock, private payrolls drop -33k in June

                                    US private sector employment unexpectedly declined by -33k in June, according to ADP data, far below expectations for a 105k gain.

                                    The weakness was concentrated in service-providing industries, which shed -66k jobs, while goods-producing sectors added 32k. Small businesses were hit the hardest, cutting -47k positions, while medium companies lost -15k, large firms added 30,000.

                                    ADP Chief Economist Nela Richardson noted that while layoffs remain rare, firms are increasingly hesitant to hire or replace departing staff. “A hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” she said.

                                    Despite the hiring slowdown, wage growth remained relatively stable. Job-stayers saw annual pay increases of 4.4% yoy in June, just slightly below May’s 4.5% yoy. For job-changers, pay growth slipped to 6.8% yoy from 7.0% yoy, suggesting firms are still offering premiums for switching jobs, though at a moderating pace.

                                    Full US ADP release here.

                                    BoE’s Taylor backs steeper rate cuts as outlook deteriorates

                                      BoE MPC member Alan Taylor warned today that the UK economy faces mounting risks to a soft landing, citing growing demand weakness and trade disruptions. In a speech, Taylor said his earlier forecast for a gradual disinflation and stable growth path is now at risk of being derailed in 2026.

                                      “My reading of the deteriorating outlook suggested to me that we needed to be on a lower rate path, needing five cuts in 2025 rather than the market-implied quarterly pace of four,” Taylor said, citing recent shocks and global uncertainty that clouded his earlier view.

                                      Taylor, who has consistently pushed for more aggressive easing, has voted for cuts in five of seven MPC meetings since joining last September—including a 50bps move in May followed by 25bps in June.

                                      ECB’s Centeno: Must wait for more data before next move

                                        Portuguese ECB Governing Council member Mario Centeno welcomed the return of Eurozone inflation to the 2% target, calling it “very good news.” However, he also stressed that the ECB remains focused on assessing incoming data.

                                        Centeno told Bloomberg TV that the ECB is “monitoring all possible numbers” and assessing various aspects of the Eurozone’s 20-member economy. “The current situation doesn’t mean that we need to rush into more interest-rate reductions,” he said. “We need to see data, we need to see the developments.”

                                        ECB’s Rehn warns of inflation undershoot risk, urges vigilance

                                          Finnish ECB Governing Council member Olli Rehn warned that the Eurozone faces renewed risks of inflation falling below the 2% target as global uncertainties intensify. While acknowledging that risks to the outlook exist on both sides, Rehn said the downside appears more pressing. “The risk of staying below target is greater in my view, especially as our projections see price growth under target for 18 months,” he noted.

                                          Rehn pointed to a trio of disinflationary forces — a strong Euro, lower energy prices, and rising tariffs — which he argued are weighing on both inflation and growth. “We need to be mindful of the risk of inflation staying persistently below 2%,” he said.