Recent Developments in U.S. Economy and Trade
In recent days, several significant events have unfolded. The most prominent is the surprising conclusion of negotiations between the U.S. government and numerous countries and regions on trade tariffs. This development seems to alleviate the anxiety surrounding trade tariffs, providing more clarity on the risks that many agents, governments, and businesses have faced throughout the year.
Fiscal Package Approval and Economic Strength
Adding to these events, the approval of the intended fiscal package by the U.S. government in July (popularly known as the BBB – Big and Beautiful Bill) and confirmation through financial reports that the economy remains robust, we must consider where to direct our focus. As stock market indices reach new highs, interest rates descend, and the dollar regains some strength, the upcoming moves by the Federal Reserve on interest rates will be crucial.
Economic Growth and Key Indicators
The U.S. economy’s solid growth, supported by various economic indicators, remains the focal point. Recent retail sales data for June showed a 0.6% month-over-month increase, surpassing market expectations (0.1% m/m) and reversing May’s contraction (-0.9% m/m). Ten out of thirteen categories reported growth, with consumer spending, which accounts for roughly 70% of the GDP, showing resilience when excluding automobiles and gas.
Labor Market Signals
Positive signals are also emerging from the labor market. Initial jobless claims fell to 217,000 units for the sixth consecutive week. Although job vacancies dipped to 7.44 million in June, slightly below market expectations (7.45 million), previous reports have demonstrated economic solidity with a 147,000 job increase and a 4.1% unemployment rate.
Consumer Confidence and Policy Uncertainty
The reduced uncertainty regarding President Donald Trump’s economic and trade policies is reflected in consumer sentiment indicators. The Conference Board’s Consumer Confidence Index rose to 97.2 in the most recent report, higher than June’s 95.2. The report indicates a decrease in pessimism about the future.
Mixed Signals and Future Outlook
Despite these positive signs, mixed signals persist. The leading economic index contracted by 0.3% month-over-month in July, below June’s 0.0% m/m and analyst expectations. Additionally, rising delinquency rates in high- and low-risk auto loans since early 2022 suggest potential consumer vulnerability. However, the probability of an imminent recession has faded from analyst forecasts.
Key Questions and Answers
- Q: How will recent trade agreements impact the U.S. economy? A: The reduced uncertainty surrounding trade policies is expected to bolster consumer and business confidence, potentially leading to increased spending and investment.
- Q: What does the recent economic data suggest about the U.S. economy’s trajectory? A: Key indicators, such as retail sales and job market data, indicate a resilient U.S. economy with solid growth prospects.
- Q: How might the Federal Reserve adjust interest rates in response to these developments? A: The Fed may adopt a more dovish stance on interest rates if economic growth remains robust, especially if President Powell is succeeded by a more hawkish replacement in May 2026.
- Q: What are the potential risks to the U.S. economy’s continued growth? A: Rising delinquency rates in auto loans and geopolitical uncertainties could pose risks to the U.S. economy’s growth trajectory.
*Rodolfo Campuzano Meza is the General Director of INVEX Operadora de Fondos de Inversión.
