A run of better-than-expected indicators — including Wednesday's inflation report — so far point to a strikingly resilient economy.
Why it matters: Those waiting for signs of a tariff-wrecked economy will have to keep waiting.
Economists anticipate President Trump's policies, particularly those related to trade, will weaken growth and raise consumer prices. But how, when, or even if looks more uncertain than ever. State of play: Consider the economic news flow in recent days.
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00:00Inflation reports suggest damage from Trump's tariffs isn't guaranteed a run of better-than-expected indicators, including Wednesday's inflation report.
00:08So far point to a strikingly resilient economy.
00:12Why it matters. Those waiting for signs.
00:16Of a tariff-wrecked economy will have to keep waiting.
00:19Economists anticipate President Trump's policies, particularly those related to trade, will weaken growth and raise consumer prices.
00:26But how, when, or even if looks more uncertain than ever.
00:31State of Play
00:32Consider the economic news flow in recent days.
00:36The May Consumer Price Index came in cooler than expected, extending a months-long streak of easing price pressures.
00:44U.S.-China
00:44Trade tensions appear to have simmered down, with Trump touting a deal that will unlock critical minerals for U.S. manufacturers.
00:52Treasury Secretary Scott Besant told lawmakers Wednesday that U.S. tax receipts in May came in almost 15% above, the previous year, despite cuts at the Internal Revenue Service.
01:05Stock prices are approaching record levels, less than 2% below the all-time high reached in February.
01:11The Intrigue
01:13The Wall Street consensus is that a tariff shock will weaken the economy and put upward pressure on inflation.
01:20Economists are just waiting for something to happen, much like
01:23the two characters in the play waiting for Godot.
01:26The huge question is whether the anticipated slowdown, Godot, shows up.
01:32What to watch
01:33Many businesses are running down supplies brought in from overseas before tariffs took effect, shielding consumers from price hikes.
01:41Once that inventory dries up, retailers will have to face tough choices about how much to pass along to customers.
01:47Those front-loading effects have created an economic mirage of sorts, resulting in a demand surge that isn't expected to stick.
01:53Last to see
01:56Week's employment report signaled some underlying weakness in the job market, including a surge of workers leaving the labor force.
02:04It's too soon to tell whether the exodus was a one-off.
02:07A bond market sell-off in recent weeks signaled a reversal of norms that prevailed in the 2010s.
02:13Investors demanding more compensation to hold longer-term debt, a phenomenon partly ignited
02:18by higher deficits signaled by Trump's signature tax legislation,
02:22Interest rates are below peak levels seen at the height of the inflation shock,
02:26but they're still high enough to be considered restrictive on economic activity by many Fed officials.
02:32It's unclear how that extended weight will ripple through the economy.
02:36What they're saying?
02:38Tariff-driven price increases may not feed through to the CPI data for a few more months yet,
02:43so it is far too premature to assume that the price shock will not materialize,
02:48Seema Shah, Chief Global Strategist at Principal Asset Management, wrote in a note.
02:53The bottom line?
02:54The economy has somewhat painlessly adjusted to huge shocks in recent years,
