In the U.S., S&P Global projects that retail sales (excluding autos) will have increased by 0.4% month over month in May. However, the company thinks headline retail sales will have dropped by 0.6% as auto sales fell sharply in May after spiking in April and March (presumably front running tariffs). The company expects industrial output and housing activities will have rebounded in May, with industrial output up by 0.1% over the month after remaining flat in April, while housing starts stay flat.
S&P expects the Federal Reserve to hold the fed funds rate at 4.25% – 4.50% this week before easing by 50 basis points in Q4/25.
S&P Global Ratings published this weekly preview of the most important upcoming economic data for the U.S. and Canada and broke down last week’s releases:
What’s Happening This Week: All Eyes On The Fed
U.S.
Tuesday: May retail sales and industrial production
- We expect retail sales growth for May to decline by 0.6% month over month, after rising 0.1% in April, as motor vehicle sales dropped in May.
- Meanwhile, retail sales excluding auto likely edged up to 0.4% month over month in May following a 0.1% gain in April.
- We think tariffs and rising uncertainty for growth are contributing to consumer pessimism, weakening vehicle sales. Additionally, we expect declining inventories to lead to lower sales.
- Johnson Redbook same-store-sales growth for May also slowed to 5.5% year over year-–down from 6.7% in April. Further, for the week ended June 7, same-store-sales growth continued to moderate, to 4.7% year over year, compared to 4.9% in the previous week
Wednesday: FOMC meeting and May housing starts and building permits
- We expect the Fed to hold the fed funds rate at 4.25%-4.50% as it assesses data and its economic outlook amid policy uncertainty. The central bank has been on pause since it cut rates by 100 basis points between last June and December.
- We anticipate industrial output growth in May will have ticked up to 0.1% after remaining flat in April amid persistent weakness in manufacturing output.
- The Institute for Supply Management’s manufacturing Purchasing Managers’ Index for May contracted, given the consistent decline in production subindices for the past three months. The S&P Global Market Intelligence Purchasing Managers’ Index picked up in May to 52.0, but uncertainty around tariffs and trade policy continued to dominate the manufacturing landscape.
- We anticipate housing starts will have remained flat in May. In March, housing starts fell sharply to 1.339 million units from 1.490 million units in February.
Why it matters
- Consumer spending will be a key indicator for policymakers to assess the health of households.
- The policy rate will be crucial in shaping the country’s growth outlook while the Fed assesses risks associated with tariffs and geopolitical uncertainty, such as disrupted supply chains and lower economic stability.
- Further, the financial market is watching the Fed’s summary of economic projections, which provide the central bank’s growth, inflation, and unemployment forecasts.
Looking ahead
- We expect household spending to further moderate in the second half of the year, driven by a gradual slowdown in the labor market and anticipated higher inflation, which will likely weigh on consumer spending.
- Additionally, we project a restrictive policy rate, curbs to immigration, and federal government cost-cutting to dampen aggregate demand.
- We think the Fed will ease by 50 basis points in the final quarter of 2025, when the risks to employment begin to outweigh the risk of higher inflation.
Canada
Friday: April retail sales
- We expect retail sales to have remained resilient, with a month-over-month increase of 0.5% in April driven by strong motor vehicle sales, building on a 0.8% rise in March.
- We anticipate retail sales growth, excluding motor vehicles, will have risen by 0.4%, slightly slower than the headline figure, after a decline of 0.7% in March.
Why it matters
- Consumer spending remains strong despite a notable slowdown in the labor market due to rising trade tensions with the U.S.
Looking ahead
- We anticipate that consumer spending growth will slow in the second half of the year, driven by persistently high core inflation and a decline in population growth given reduced immigration.
- Further, the central bank has expressed concerns regarding recent survey data that shows increasing near-term inflation expectations. This suggests that firms may be inclined to pass on higher costs associated with tariffs to consumers, further denting consumer spending.
- We expect housing starts to decelerate due to increasing uncertainty regarding economic growth, particularly as trade tensions with the U.S. weigh on investments. Trade-sensitive industries are already experiencing lower activity, which further compounds the issue.
Last Week’s Data Highlights
U.S.
- In May, the headline Consumer Price Index increased by 0.1% month over month, falling short of market expectations, following a 0.2% rise in April. This brings year-over-year inflation to 2.4%, from 2.3% the prior month.
- These inflation figures suggest that tariffs haven’t yet fully fed through to consumer prices.
- Food prices slightly increased, by 0.3%, following a 0.1% decline in April. However, egg prices fell for the second consecutive month.
- Energy prices fell 1.0% month over month, after a slight increase of 0.7% in April. Year-over-year energy prices fell for the fourth consecutive month, decreasing by 3.1% following a 3.5% drop in April.
- Prices for motor vehicle parts increased by 0.9% month over month in May, following a 0.1% decline in April. This may reflect the influence of tariffs on steel and aluminum, although it is too soon to draw definitive conclusions. Typically, parts and equipment show the effects of tariffs before finished motor vehicles do.
- The Core Consumer Price Index, which excludes food and energy, increased by 0.1% month over month, down from a 0.2% rise in April. The year-over-year level remains 2.8%, where it’s been for the past three months.
- Initial jobless claims remained unchanged for the week ending June 7 at 248,000. However, the four-week moving average increased to 240,250, marking the highest level since August 2023.
- Continued claims rose by 54,000 for the week ending May 31, reaching 1.956 million. Meanwhile, the four-week moving average reached its highest level since November 2021.
- The producer price index for May was slightly weaker than consensus expectations. The headline level increased by 0.1% month over month in May, following a 0.2% decline in April, bringing the year-over-year level to 2.6%, from 2.5% previously.
- The core producer price index also rose by 0.1% in May, resulting in a year-over-year increase of 3.1%, compared to 3.4% in April.
- The producer price index for airfares, portfolio management, and hospital outpatient care all decreased in May. This is a positive sign for the personal consumption expenditures price deflator, as these components contribute to the Fed’s preferred inflation measure: the personal consumption expenditures price index.
- The University of Michigan consumer sentiment index increased sharply to 60.5 in June, from 52.2 in May. This was the first monthly gain in the past six months.
- The improved consumer sentiment perhaps relates to ongoing trade negotiations with China and with other countries ahead of the expiration of the 90-day pause on the U.S.’ countertariffs. However, consumers remain pessimistic about the economy amid elevated risks to growth.
- The survey also revealed that one-year-ahead inflation expectations dropped to 5.1% from 6.6% while long-term inflation expectations edged down to 4.1% in June from 4.2%.
Canada
- Housing starts came in largely flat in May from April. The seasonally adjusted annualized rate of housing starts was down 0.2% to 279,510 units from a revised 280,181 units in April.
- In April, building permits decreased by 6.5% month over month to an annualized 102,460 units, following a 5.1% increase in March. This decline was recorded in multi- and single-family dwellings.
- However, year-to-date average monthly building permits have surpassed the average for 2024, which could bode well for the housing market.
- In value terms, building permits decreased by C$829.6 million (-6.6%) to C$11.7 billion. British Columbia (-C$1.2 billion) led the decrease, partially offset by Ontario (+C$299.3 million).
- Manufacturing sales fell 2.8% in April, the largest monthly drop since October 2023, given the tariff dispute with the U.S. Lower sales of petroleum and coal products (-10.9%), motor vehicles (-8.3%) and primary metals (-4.4%) drove the decline.
Overall, industries in the country operated at 80.1% of their production capacity in the first quarter, up 0.4 percentage points from the previous quarter. The industrial-capacity utilization rate rose in the first quarter to a level last recorded over two years ago, buoyed by companies keen to buy and sell goods before hefty U.S. tariffs kicked in.
