Weekly Market Commentary June 2, 2025

Last week’s economic data offered a mixed view of the U.S. economy, beginning with a notable rebound in consumer sentiment. On Tuesday, consumer confidence rose sharply in May to 98 from 85.7 in April, reversing five months of declines. The improvement was driven by a significant increase in expectations for future income and business conditions. Current assessments of the economy also improved, though concerns about job availability remained.

On Thursday, the second estimate for first-quarter gross domestic product (GDP) showed a slight contraction of 0.2% on an annualized basis. This marked a reversal from the previous quarter’s growth and was primarily due to increased imports and reduced government spending. However, consumer spending, business investment, and exports provided some support, indicating that domestic demand remains relatively stable despite external pressures.

Friday’s data added more context to the economic picture. The Personal Consumption Expenditures (PCE) price index rose 0.2% in April, with the year-over-year rate easing to 2.1%. Core PCE, which excludes food and energy and is closely watched by the Federal Reserve, increased 0.1% month-over-month and 2.5% year-over-year. These figures suggest that inflation pressures are gradually moderating. Personal income rose 0.8%, and the savings rate edged up to 4.9%, indicating that households are maintaining a cautious but steady financial posture. Meanwhile, the Chicago Purchasing Managers' Index (PMI) showed a slight decline, pointing to a mild contraction in manufacturing activity in the Midwest. However, resilience in the service sector helped offset some of the weakness.

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