Daily Newsletter 7/16/25
The Producer Price Index (PPI) for final demand remained flat in June 2025. Within the headline figure, prices for final demand goods increased by 0.3%, while the index for final demand services declined by 0.1%. On a year-over-year basis, the final demand index rose 2.3% on an unadjusted basis.
The core Producer Price Index (PPI) in the United States, which excludes food and energy, was unchanged in June 2025 from the previous month. This follows an upwardly revised 0.4% increase in May and comes in below market expectations of a 0.2% rise.
This development could raise the likelihood of a Federal Reserve rate cut; however, even the agenda for the upcoming meeting may be adjusted if the Fed concludes that inflation is meaningfully easing. It's also important to consider that Fed Chair Jerome Powell is facing political pressure to lower interest rates, which may influence the policy outlook.
While markets have been anticipating the start of earnings season, yesterday brought relatively optimistic commentary from two major U.S. banks—JPMorgan Chase and Citigroup. Both institutions expressed a positive outlook on the U.S. economy, with particular emphasis on the strength of the U.S. consumer. Although large bank earnings can be interpreted through multiple lenses, the market is likely to view this sentiment as a bullish signal, at least in the near term.
It may be time to revisit the old adage: "Never bet against the American consumer." The resilience and strength of U.S. consumers continue to be a cornerstone of economic growth. Recent data shows no clear signs of weakness in consumer behavior, and credit and debt metrics remain broadly stable, with no evident signs of financial stress.
Another potential catalyst for the markets is the U.S. government's decision to reverse the ban on AI chip exports to China. This move has already had, and is likely to continue having, a positive impact on the technology sector—particularly on stocks that are already trading at elevated valuations. However, recent market behavior suggests that many investors remain largely unconcerned with overvaluation, as long as favorable momentum continues to support risk appetite.