Expectations in terms of growth for Q2 remain favourable: we expect it to be +0.6% q/q compared to +0.5% q/q for the Atlanta Fed's GDPNow. However, several elements suggest a more difficult Q3. The ISM surveys in June returned a negative signal: mixed for the manufacturing component, which deteriorated marginally, to 48.5 (-0.2 points), against a backdrop of falling production (48.5, -1.7 points), more marked for the non-manufacturing index, which fell to 48.8 (-5.0 points), against a backdrop of a correction in activity (49.6, -11.6 points), and a deterioration in new orders (47.3, -6.8 points). The NFIB (Small Business Optimism Index) again rose only slightly in June (91.5, +1.0 points); while consumer sentiment (measured by the University of Michigan) fell for the fourth consecutive month in July (66.0, -2.2 points).
The labour market is cooling more sharply. In June, the creation of salaried jobs stood at +206k (-12k), a figure accompanied by downward revisions over the previous two months (-111k cumulatively) and confirming, smoothed over six months or one year, a downward trajectory for several quarters. Private payroll growth slowed significantly, from +193k to +136k, partly cushioned by an acceleration in the public sector. At the same time, wage growth, measured by average hourly income, fell to +3.9% y/y after the acceleration in May. The unemployment rate reached 4.1% (+0.1pp), the highest since November 2021, moving it closer to the recession signal.
Disinflation continued in June, with year-on-year shifts unprecedented since spring 2021 (3% y/y for the CPI and 3.3% y/y for the underlying index). Housing services, where inflation has long been more difficult to curb, saw a significant monthly slowdown (+0.2% m/m, -0.2pp), bringing annual growth to +5.1% (-0.3pp).
In his speech to Congress on 9 July, Jerome Powell expressed satisfaction with the recovery of the disinflation trajectory. With a June CPI in line with his wish for "more good data", we anticipate a first rate cut (-25bps) at the September FOMC meeting, bringing the rate target to +5.0/+5.25%.
Article completed on 12 July 2024
