1. The University of Michigan consumer sentiment index rebounded more than expected on relief from falling gasoline prices.

– This chart shows a series adjusted for the impact of transitioning from phone-based to online surveys.

• The improvement was broad-based, with both current conditions …

… and expectations rising.

• Let’s look at some alternative sentiment indicators.
– The Penta-CivicScience Economic Sentiment Index edged up for the two weeks ending June 2.

– The San Francisco Fed’s daily news sentiment index has been range-bound over the past few weeks.

2. Consumers’ median inflation expectations eased, particularly for the 5–10-year horizon.

• Market-based inflation expectations, based on inflation swaps, have softened across tenors.

• Our monthly tracking for the Fed’s Index of Common Inflation Expectations has been stable.

3. US capital spending has increasingly shifted from structures and equipment toward intellectual property and R&D over the past four decades.

4. Financial conditions have resumed easing.

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1. New motor vehicle sales remained in a year-over-year contraction.

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1. UK GDP contracted in April, weighted down by temporary factors, including weaker retail sales after March fuel hoarding unwound, a doctors’ strike, and a sharp decline in administrative and support services.

2. Industrial output was unexpectedly flat in April.

3. Construction output remained in a year-over-year contraction, although near-term momentum has improved.

4. Services sector activity edged down.

5. The trade deficit narrowed, driven by a smaller shortfall in the goods trade balance.

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1. The European Central Bank raised rates by 25 bps, in line with expectations. The Governing Council described the unanimous decision as “robust” rather than an “insurance” hike, signaling strong conviction. However, President Lagarde provided little forward guidance.

– ECB staff significantly upgraded inflation forecasts, with core inflation now projected to remain above target through 2028, but downgraded near-term growth, highlighting a difficult trade-off for policymakers.