- Yesterday's US retail sales data is another reminder that, in the face of a significant disruption, we should not underestimate the resilience and adaptability of humans. The recovery from extreme adversity is nearly always a positive surprise. Forced savings in lockdowns allowed Americans to spend – and they spent.
- However, as US Federal Reserve Chair Powell noted yesterday, the outlook is still uncertain. Economic models will not work well in this crisis because consumers will react differently compared to the past. The quality of economic data remains very poor. There is uncertainty about how consumers will react to rising infection rates.
- Japanese trade data showed a dramatic drop in car exports to the US in May, as part of general export weakness. Globally, the spending surge coming out of lockdown may first be met by using inventory rather than producing goods. That will lead to more production in the future. UK and European price data should confirm disinflation as the dominant pricing trend.
- Political tensions are evident between North and South Korea. India and China have clashed over an uninhabitable part of their border. Markets tend to ignore this sort of thing. There is little near-term economic impact, though longer-term trend growth may be negatively affected.