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Consumer Sentiment Weakens, Inflation Fears Grow
US data raised recession fears on May 16. The Michigan Consumer Sentiment Index fell from 52.2 in April to 50.8 in May. Weaker sentiment could signal a pullback in consumer spending, potentially impacting the US economy since it contributes over 60% to GDP. Meanwhile, the Inflation Expectations Index jumped from 6.5% to 7.3% in May.
The combination of weakening sentiment and higher inflation expectations signaled potential stagflation, a key Fed concern.
While Wall Street ended higher on Friday, the Moody’s downgrade weighed on Asian markets on Monday, May 19.
China Data Sparks Mixed Market Response
Economic data from China sent mixed signals on Monday, May 19. Although unemployment declined, sharply slower retail sales in April suggested the US-China trade war dampened sentiment. Meanwhile, industrial production increased 6.1% year-on-year in April, down from 7.7% in March, but higher than the expected 5.5% rise.
While retail sales trends may raise concerns about Beijing’s goal to transition to a consumption-driven economy, a tighter labor market suggests the stimulus measures have gained further traction.
Hang Seng Falls Despite Property Sector Gains
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