The Macro Brief: Fragile Gains, Rising Tensions

A brief on soft landings, tightening wallets, and global demand warnings.

Last week, U.S. equities broke down as bond markets seized up:

• S&P 500 fell 1.6%, marking the fourth straight decline (AP News)
• 10-Year Treasury yield dropped to 4.22% — its steepest single-day decline since April (Barron’s)

Markets may look calmer on the surface — but underlying volatility has spiked.

---

📊 Real Wages vs. Real Costs

Although nominal wage growth remains positive, inflation is eating into purchasing power:

• Average hourly earnings up ~3.9% YoY
• Consumer inflation: ~2.6–3.2% depending on the metric
• Health insurance premiums: +11% YoY
• Rent inflation: climbing again in major metros

The nominal gains fail to offset living expenses, especially for lower- and middle-income households.

(Barron’s, RTT News)

---

🌐 Global Theme: China’s Industrial Weakness Signals Global Strain

China’s Producer Price Index is now down 3.6% YoY as of June — the largest drop in nearly two years. (Bloomberg)

While consumer inflation rose +0.1%, industrial demand remains weak. This global deflationary trend:

• Suppresses commodity prices
• Dampens U.S. goods inflation
• Pressures emerging markets

Weak international demand could weigh on Q4 corporate earnings outside the U.S.

---

📉 Financial Fragility: Credit vs. Savings

• U.S. credit card balances: $1.18 trillion (RTT News, LendingTree)
• Credit card delinquency rates: highest since 2010 (FT)
• Personal savings rate (June): 4.5%, down from 5.0% in April (FRED)

Consumers are still spending, but increasingly on borrowed capital. Financial cushions are thinning.

---

📈 Chart of the Week: Savings Rate vs. Credit Debt

• Savings rate: 4.5%
• Credit debt: ~$1.18T in revolving credit
• Delinquencies: rising fastest in subprime segments

This gap between debt growth and savings is troubling and historically unusual.

---

🔎 Key Events This Week

• Thursday: CPI release — Expect a slight uptick in headline inflation driven by energy and rent
• Earnings: Disney, Eli Lilly, Palantir — focus on forward guidance
• Fed speeches — Markets will parse tone post-jobs report and tariff escalation

---

📌 Summary

The U.S. is grappling with sluggish jobs data, renewed trade tensions, and pronounced financial strain among consumers. Equity markets are pricing in a soft landing narrative, but bond markets and household credit data suggest fragility. The odds of a September Fed rate cut have surged above 75% (Business Insider, WSJ).

---