Key takeaways
- Global data points to uneven but continued economic growth
- U.S. consumer remains resilient, though signals are mixed
- Markets lean optimistic as policy outlook evolves
Patchwork growth, pockets of resilience
This week’s macro data pointed to a mixed but still expanding global economy.
S&P Global flash PMI surveys showed the U.S. index rising from 50.3 in March to 52.0 in April, consistent with modest growth. However, the composition of that growth warrants attention.
Manufacturing activity has been relatively stronger, supported in part by pre-emptive purchasing and inventory rebuilding. Whether that momentum is sustained will depend on follow-through in services activity and new orders.
In Europe, the picture is less resilient. Services activity has softened to multi-year lows, reflecting the impact of geopolitical disruption, policy uncertainty and affordability pressures. In several regions, goods-producing sectors are holding-up better than services, which is a less balanced mix for a durable expansion.
Overall, the data suggests pockets of resilience, but not a broad-based acceleration.
Consumer spending holds, but signals are noisy
In the U.S., retail sales data pointed to continued consumer strength, though underlying trends appear more moderate.
March retail sales rose 1.7% month-over-month and 4% year-over-year, marking the strongest monthly increase in more than three years. However, much of that gain was driven by higher gasoline prices.
Excluding gas stations, sales rose a more modest 0.6%. This suggests that while consumer spending remains intact, the signal is somewhat distorted by energy-related price effects.
Corporate earnings provide an additional lens. Results from American Express indicate that higher-income consumers remain in solid shape, with spending and credit trends holding up. United Airlines results also suggest that demand remains stable, even as companies adjust pricing to offset higher fuel costs.
Taken together, the consumer continues to support the economy, but with growing sensitivity to prices and costs.
Markets optimistic as policy comes into focus
Despite mixed macro signals, market sentiment has remained constructive.
U.S. equities are trading near record highs, supported by earnings strength and relative insulation from energy shocks. Emerging markets, which sold off in March, have rebounded as energy prices stabilized and technology-related demand remained supportive.
Markets appear to be pricing in continued economic durability rather than disruption.
On the policy front, attention has turned to recent Federal Reserve commentary. Discussions around alternative inflation measures, such as trimmed mean inflation, suggest a potential shift in how policymakers assess progress toward inflation targets.
While this could create more flexibility for future rate cuts, the near-term outlook remains unchanged. The Federal Reserve is widely expected to hold rates steady at its next meeting as it evaluates the impact of recent energy-driven price pressures.