July 27, 2026

July 20 – July 26, 2026: Weekly economic update

Key market updates

Key Takeaways:

The policy rate remains unchanged, while the Fed's rhetoric remains cautious;
Monetary policy remains moderately restrictive;
U.S. macroeconomic data continue to support a soft-landing scenario: inflation risks are increasing, the labor market is cooling without signs of recession, and current conditions do not yet warrant a rate cut.

Inflation: Consumer Price Index (May)

Core CPI (MoM): 0.0% (previous: 0.2%).
Core CPI (YoY): 2.6% (previous: 2.9%).
CPI (MoM): -0.4% (previous: 0.5%).
CPI (YoY): 3.5% (previous: 4.2%).

Producer Price Index (June)

Further constructive indicators emerged as consumer inflation expectations and producer prices shifted lower.

PPI (MoM): -0.3% (previous: 0.6%).
Core PPI (MoM): 0.2% (previous: 0.1%).

Inflation Expectations (Michigan) (June)

12-month Inflation Expectations: 4.2% (previous: 4.6%).
5-Year Inflation Expectations: 3.3% (previous: 3.3%).

GDP (U.S. Bureau of Economic Analysis, BEA) — Q1 2025 annualized growth rate, third estimate: +2.1% (Q4 2025: +0.5%); forecast: 1.6%; second estimate: 2.0%.

GDPNow (the Atlanta Fed's real-time estimate of official GDP growth ahead of release): 1.7% (previous: 1.4%).

Labor Market (BLS) (May/June)

Unemployment Rate: 4.2% (previous: 4.3%).
Continued Jobless Claims: 1.796K (previous: 1.805K).
Initial Jobless Claims: 187K (previous: 208K).
Nonfarm Payrolls (NFP): 57K (previous: 129K).
Private Nonfarm Payrolls: 49K (previous: 97K).
Average Hourly Earnings (YoY): 3.5% (previous: 3.4%).
JOLTS Job Openings: 6.866 million (previous: 6.922 million).

Business Activity Index (PMI) (June)

(Above 50 indicates expansion; below 50 indicates contraction)

Services PMI: 53.6 (previous: 51.2).
Manufacturing PMI: 53.8 (previous: 53.9).
Composite PMI: 53.6 (previous: 51.9).

Monetary Policy

Effective Federal Funds Rate (EFFR): 3.50%–3.75%.

Federal Reserve Balance Sheet: $6.747 trillion, +3.24% since the suspension of quantitative tightening (QT), when the balance sheet stood at $6.535 trillion.

Market Forecast for Rate (Fedwatch)

For the next FOMC meeting (July 29), the implied market probability of a rate hike has increased to 34.2% (week ago: 34.21%):

Over the next 12 months, the market anticipates two 25-basis-point rate hikes, bringing the target range to 4.00%–4.25% by September and December:

Today:

A week earlier:

SP500

Weekly performance: -0.61% (week-end close: 7411.98); year-to-date: +8.28%.

Nasdaq 100

Weekly performance: -1.62% (week-end close: 28128.34); year-to-date: +11.40%.

VIX

VIX (volatility index): week-end close at 18.57 points.

Company Earnings from Last Week

The earnings season kicked off with performance notably exceeding expectations. A majority of corporations surpassed analyst projections for major financial metrics, and forward-looking earnings-per-share (EPS) guidance has climbed to levels not seen since 2011. This trend underscores sustained business optimism regarding future economic conditions.

Eurozone

The ECB raised interest rates, while maintaining a hawkish stance as inflationary risks continue to increase;
Against the backdrop of the conflict in the Middle East, the ECB revised its GDP forecasts downward and raised its inflation projections for the coming years.

Interest Rates

Deposit Facility Rate: 2.25% (previous: 2.0%);
Marginal Lending Facility Rate: 2.65% (previous: 2.4%) — the rate at which banks can obtain overnight funding from the central bank;
Main Refinancing Rate (Policy Rate): 2.40% (previous: 2.15%).

Inflation: Consumer Price Index (CPI) (June)

Core CPI (YoY): 2.4% (previous: 2.6%);
Headline CPI: -0.1% (MoM) (previous: 0.1%); 2.8% (YoY) (previous: 3.2%).

GDP (Q1 Preliminary Estimate)

QoQ: -0.2% (previous: 0.1%);
YoY: 0.3% (previous: 1.2%).

Unemployment Rate (June)

6.2% (previous: 6.3%).

Industrial Production (June)

MoM: 0.1% (previous: 0.9%);
YoY: 1.67% (previous: 1.37%).

Purchasing Managers' Index (PMI) (May)

Services PMI: 51.6 (previous: 49.4);
Manufacturing PMI: 52.0 (previous: 51.4);
S&P Global Composite PMI: 51.9 (previous: 50.0).

Euro Stoxx 600 (FXXP1!)

Weekly performance: -0.05% (week-end close: 645.9); year-to-date: +8.74%.

China

China's economy continues to stabilize, supported by strong export performance, while domestic demand and investment are gradually recovering. Policymakers remain measured and targeted in their approach to economic stimulus.

Interest rates remain unchanged;
Monetary policy remains accommodative;
China reaffirmed its commitment to fiscal support for economic growth under its 2026 plan, including measures to stimulate domestic demand, optimize tax incentives and subsidies, and modernize industrial capacity.

Interest Rates

1-Year Loan Prime Rate (medium-term lending): 3.00%;
5-Year Loan Prime Rate (benchmark for mortgage lending): 3.50%.

Inflation Indicators (June)

Consumer Price Index (CPI): -0.3% MoM (previous: -0.1%); 1.0% YoY (previous: 1.2%);
Producer Price Index (PPI): 4.1% YoY (previous: 3.9%).

Trade Data (June)

Imports: 36.0% YoY (previous: 27.4%);
Exports: 27.0% YoY (previous: 19.4%);
Trade Balance (USD): $125.62 billion (previous: $105.43 billion).

GDP (Q2 2026)

QoQ: 0.9% (previous: 1.3%);
YoY: 4.3% (previous: 5.0%).

Labor Market

Unemployment Rate (June): 5.0% (previous: 5.1%).

Industrial Activity

Industrial Production (June, YoY): 5.3% (previous: 4.5%).

Fixed Asset Investment

June, YoY: -5.7% (previous: -4.1%).

Retail Sales

June, YoY: 0.9% (previous: 1.3%).

Purchasing Managers' Indices (PMI) (May)

Manufacturing PMI: 50.3 (previous: 50.0);
Non-Manufacturing PMI: 50.2 (previous: 50.1);
Composite PMI: 50.6 (previous: 50.5).

CSI 300 Index (000300.HK)

Weekly performance: +1.11% (week-end close: 4649.1917); year-to-date: -0.27%.

Bond Market

U.S. Treasury Bonds 20+ Years (TLT ETF): -1.14% for the week (weekly close: 83.25); -4.49% year-to-date.

Yields and Spreads

Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity: 4.68% (previous: 4.57%);
2-Year U.S. Treasury Yield: 4.33% (previous: 4.19%);
ICE BofA BBB US Corporate Index Effective Yield: 5.62% (previous: 5.45%).

The yield spread between 10-year and 2-year U.S. Treasury securities stands at 35 basis points (previous: 38 bps);
The yield spread between 10-year and 3-month U.S. Treasury securities stands at 77 basis points (previous: 77 bps).

U.S. Treasury Yield Curve

The cost of a 5-year U.S. Credit Default Swap (CDS) — a market-based measure of sovereign default insurance — dropped to 37.33 basis points, compared with 38.20 basis points a week earlier.