Core Insights - The core PCE inflation appears to be worsening, not better than when the Federal Reserve began lowering interest rates last year [1] - The three-month annualized rate of the core PCE price index in June was 2.6%, compared to 2.3% in the same month last year [1] - The six-month annualized rate for the core PCE was 3.2%, slightly down from 3.3% in the same period last year [1]

Core Insights - The impact of tariffs on U.S. consumer prices has been unexpectedly muted, with significant effects yet to materialize [1][2] - Goldman Sachs predicts that the core PCE inflation will rise to 3.3% by the end of 2025, with tariffs contributing approximately 1% to this increase [1][7] Delayed Transmission of Tariff Costs - The effective tariff rate is expected to increase by about 9 percentage points due to announced tariffs, with a total expected increase of around 14 percentage points [2] - As of May, the effective tariff rate had only risen by 7.2 percentage points, indicating a lag in the expected impact [2] - Three main factors contribute to this delay: the timing of tariff implementation, the ability for importers to defer tariff payments, and companies stockpiling goods ahead of tariff increases [2][5] Foreign Exporters Bearing Costs - Foreign exporters are absorbing approximately 20% of the tariff costs by lowering export prices, a significant increase from nearly zero during the 2018-2019 trade conflict [3][4] Consumer Price Transmission - The transmission of tariff costs to consumers is slow, with only 0.3% of the expected price increase realized in the first month after tariff implementation [5] - The transmission rate increases over time, reaching 40% by the third month, compared to a faster transmission during the previous trade conflict [5][6] Inflation Forecasts - Despite the delayed transmission of tariff costs, Goldman Sachs maintains its inflation forecast, estimating that announced tariffs have raised core PCE prices by about 6 basis points since January [7] - The firm anticipates that all tariff impacts will push core PCE up by approximately 1 percentage point by December, leading to an annual inflation rate of 3.3% [7]

Group 1 - The Federal Reserve Chairman Powell stated that unusual fluctuations in net exports complicate GDP measurements [1] Group 2 - Unemployment rate projections for the end of 2025, 2026, and 2027 are 4.5%, 4.5%, and 4.4% respectively, with slight increases from previous estimates [4] - Core PCE inflation expectations for the end of 2025, 2026, and 2027 are 3.1%, 2.4%, and 2.1% respectively, indicating upward revisions [4] - Federal funds rate projections for the end of 2025, 2026, and 2027 are 3.9%, 3.6%, and 3.4% respectively, with increases noted for 2026 and 2027 [4]

Core Insights - The Federal Reserve's economic outlook indicates that most FOMC participants perceive higher uncertainty regarding PCE inflation and core PCE inflation, with an upward risk bias [1]

Core Insights - The temporary trade agreement between the US and China has led to a rebound in US business activity in May, but the comprehensive tariffs imposed by President Trump have increased prices for businesses and consumers [1] - Despite the improvement in business sentiment, concerns about the negative impacts of Trump's policies persist, keeping sentiment slightly below the average level for 2024 [3] Economic Indicators - The S&P Global composite PMI output index rose from 50.6 in April to 52.1 in May, indicating private sector expansion [1] - The manufacturing PMI unexpectedly rebounded from 50.2 to 52.3, surpassing expectations of 50.1, while the services PMI increased from 50.8 to 52.3, contrary to predictions of stability [1] - New orders received by businesses increased from 51.7 in April to 52.4, primarily driven by manufacturing [3] Inflation and Costs - The prices paid by businesses for inputs surged from 58.5 in April to 63.4, the highest level since November 2022, indicating that companies are passing higher costs onto consumers [3] - The prices charged for goods and services rose from 54.0 to 59.3, marking the highest level since August 2022, suggesting a sharp increase in consumer price inflation [3] - Core personal consumption expenditures (PCE) inflation is expected to rise to approximately 3.5%, while GDP growth is projected to slow to below 1% this year [2] Employment and Labor Market - The employment index fell from 50.2 to 49.5, reflecting concerns about future demand, rising costs, and labor shortages [3] - Inventory investments have surged to an 18-year high due to fears of supply shortages and price increases related to tariffs [2]