Eventually is there a quarell or what?

June 14-20, 2025

Big news. The US Federal Reserve left the rate unchanged at 4.25-4.5% per annum. It worsened the forecasts for GDP, unemployment and inflation; the board members expect 2 rate cuts (0.25% each) this year and only one in 2026 and 2027. Donald Trump lashed out at Federal Reserve Chairman Jerome Powell on his Truth Social social network: “Too late. Powell is the WORST OF THE WORST. A real idiot who is costing America billions of dollars!”

Given the recent meeting in the White House (about which there is still no information), we are inclined to believe that the quarrel between “Ivan Ivanovich and Ivan Nikiforovich” is somewhat exaggerated. At least for now. Since Powell’s actions clearly indicate that he has no program to stop the crisis. And, most likely, Powell (and Trump) are already preparing to resolve the financial collapse itself.

Macroeconomics. Another batch of Chinese indicators (for May) is unremarkable.

Investments in fixed capital slowed to +3.7% per year (real estate -10.7%):

The decline in foreign direct investment accelerated slightly (-13.2% per year against -10.9% a month earlier):

Industrial production slowed to +5.8% per year (half-year low):

Retail, on the contrary, accelerated to a one-and-a-half-year peak of +6.4% per year:

New building prices are falling at the slowest rate in a year (-3.5% per year):

In general, it is practically impossible to draw any additional conclusions from the information received.

New Zealand’s GDP is -0.7% per year, the 4th minus in a row:

US Industrial Production -0.2% MoM, 7th Loss in Last Year:

US Housing Market Index Returns to 13-Year Lows in 2020 and 2022:

The number of new housing starts in the US is at its lowest since May 2020, and excluding Covid, since July 2019:

The same goes for building permits (a leading indicator of industry activity):

In fact, here too the economy has quietly approached Covid lows.

Credit growth in India (+9.0% per year) is the weakest in more than 3 years:

Japan’s CPI (consumer inflation index) without fresh food approaches 44-year peak in January 2023:

Unemployment in Sweden remains at levels seen during the Covid peak and the 2009/10 crisis:

The number of people receiving unemployment benefits in the US remains at its highest levels since fall 2021:

Philadelphia Fed’s employment component is back to last year’s 9-year lows (excluding Covid):

US Retail Sales -0.9% MoM, 2nd straight negative and worst performance in over 2 years:

Details in the next section.

The Brazilian Central Bank raised the rate by 0.25% to 15.00% – a 19-year high:

The Swiss National Bank was the first of the world’s leading institutions to return the base interest rate to zero:

The Bank of Norway unexpectedly cut the rate (by 0.25% to 4.25%), which was previously at a 15-year peak. The Bank of Sweden cut the base rate by 0.25% to 2.00%.

The Bank of Japan left the previous rates, is reducing purchases of government bonds. And the Bank of England kept the monetary policy unchanged (6 votes against 3, which were for lowering the rate). The Bank of Indonesia did not change anything, as did the Bank of Turkey and the Bank of China.

Main conclusions. The structural crisis continues. The US has obvious problems with the economy, most clearly seen in unemployment and construction. Silver prices confirm inflationary trends, they have updated their 13-year high:

It should be noted that the war between Iran and Israel had virtually no effect on the global economy. With the exception of oil prices, but they fell too much before the Israeli attack. We believe that, given the US budget deficit, emission injections into the economy are inevitable, and they require financial markets to sterilize excess liquidity. Therefore, the picture of the global economy will not change until a serious collapse.

Of course, there could be a nuclear strike on Iran, the closure of the Strait of Hormuz and/or other events of similar scale. They will certainly change the picture. Note that the events in Israel, by and large, are of little interest to anyone; from the point of view of the global economy, this country is of no particular interest. In general, in our opinion, the sluggish structural slide of the global economy will continue until the start of a major financial collapse. Most likely, this year.

Judging by the fact that the US Federal Reserve has not changed anything, there is no action plan to overcome the current situation (in reality, almost four years of continuous decline). We think so, among other things, because Powell is openly lying about the state of the country’s economy. And since the US authorities most likely understand that a collapse of financial markets is inevitable, there will be no active actions until that moment. And these actions will be joint; Trump and Powell’s personal relationship will not interfere with the matter.

For your information, the Fed’s cover letter and Powell’s press conference theses.

Cover letter:

▪️Economic activity continues to grow at a solid pace

▪️Unemployment remains low, labor market conditions stable

▪️Inflation remains slightly elevated

▪️Uncertainty about the economic outlook has eased, but remains elevated

▪️Fed is mindful of risks to both sides of the dual mandate labor market inflation

▪️Fed forecasts 2 rate cuts this year by 50 bps

▪️Fed to continue QT balance sheet reduction

▪️Fed to carefully evaluate macro data for future interest rate decisions

▪️Fed ready to adjust monetary policy if risks to achieving targets arise

▪️Monitoring includes: labor market, inflation pressures, financial and international events

▪️Target: maximum employment and 2% inflation in the long term

▪️GDP forecast for 2025: 1.4% lowered from 1.7% in March

▪️Fed removed wording about risks of higher unemployment and inflation

Jerome Powell Speech: Uncertainty has declined but remains elevated.

▪️When analyzing the Fed’s forecasts, focus on the short term.

▪️It is difficult to consider the long term in an environment of economic uncertainty.

▪️We are adjusting in real time – it all depends on the impact of tariffs on the economy.

▪️Economic uncertainty peaked in April and has declined.

▪️We may see a slow but continuing cooling in the labor market.

▪️No one is holding onto the interest rate path with much confidence.

▪️We will likely reach a point where a rate cut will be appropriate.

▪️Economic uncertainty has decreased, but is still high.

▪️Given the labor market data and the decline in inflation, the right decision is to leave the rate unchanged.

▪️We will learn more about the impact of tariffs on the economy this summer. We need real data to make decisions.

▪️We will make a smarter decision if we wait a couple of months.

Since this week saw the release of extremely important data on industrial production (no need to explain anything here) and retail sales in the US (they form more than half of GDP in almost any country), we believe it is necessary to clarify the indicators on these issues. For this purpose, we present the materials of Pavel Ryabov.

“US industrial production data deteriorates for the third month in a row

Trump-style industrialization does not work. It is clear that you cannot build factories, launch them and start a “new industrial era” in 4 months, but you can reload idle production capacities, but no.

The level of capacity utilization has been continuously declining since Feb. 25 (78%), in March – 77.8%, in April – 77.7%, and in May – 77.4%, this is the minimum since Dec. 24 and at the level of mid-2021, while after Covid, the maximum level of capacity utilization was from March to October 2022 at 81%.

Since the beginning of the 2000s, the level of production utilization above 80% occurs in conditions of intensive economic growth, 76-78% with low-intensity growth, and 76% and below during recessions.

Industrial data is weak. After strong growth in February, 1.04% m/m, in March (-0.24%), in April +0.07%, in May (-0.22%) m/m.

Annual growth is slowing down again to 0.6% after forming a local peak of 1.2-1.4% growth at the beginning of 2025, but there is no progress in two years, or in 5 years, or even in 10-15 years.

Compared to 2008, a symbolic increase of 3.5%. This is the 7th attempt in 15 years to break through the 2007-2008 level and consolidate at least with growth of 2-3%, but it is not working, again the industry is turning down – an impenetrable ceiling.

In two years, the industry is +0.6% as of May, in 6 years +1.15%, in 10 years +2.8%, and by 2008 +3.5% – inexpressive.

▪️May Manufacturing +0.5% YoY, +0.2% over 2Y, +0.8% vs. 2019, (-0.4%) vs. 2015 and -5% vs. May 2008.

▪️Mining +2.9% YoY, +1.8% over 2Y, +0.4% over 6Y, +17.2% over 10Y and +45.5% vs. 2008, but there are signs of a future slowdown due to drilling activity indicators due to low oil prices over the past three months (the effect may manifest itself in 2H25).

▪️Electricity and utilities down 1.6% YoY, +2% over 2Y, +1.3% over 6Y, +5% over 10Y and 17Y. It was believed that AI would give a boost to electricity demand to unprecedented levels of up to 20% in 10 years and up to 10% in 5 years as part of the global increase in demand, but that there is not much visible sustainable growth in electricity demand.

During the Trump administration, industry grew by 1.1% y/y, +0.8% over two years and +1.2% over six years.

Manufacturing grew by 0.7% y/y in 4 months, +0.3% over two years and +0.5% over six years, mining only +1.5% y/y, +1.5% and +1.2% respectively, and electricity +3.3% y/y, +3.6% and +2.7%.

Can the AI ​​factor be considered significant, given that the integration of data centers has been going on for more than three years, and the growth of global output is within the margin of error on a rolling comparison?”

“US retail sales data came out surprisingly disgusting

In May, retail turnover fell by 0.91% m/m, and the April data was significantly revised down by 0.3%, i.e. a gap of 1.2% suddenly appeared.

It turned out that in May, the volume of retail sales was lower than in December by 0.3% at par, and these are really disgusting results.

Never in modern history, at least since 1992, has the beginning of the year been so weak (even in 2009 there was growth of 0.7% at par) – the only exception was in 2020, but there was a technical moment of forced blocking of the economy, and not a natural process of development of macroeconomic processes.

For comparison (May to December) in 2024 +0.94%, in 2023 +3.4%, in 2022 +6.44%, and from 2011 to 2019 on average +1.91%, so the beginning of 2025 is really very bad.

Taking into account inflation (May to December), a decline of 0.86% in 2025 vs. +0.62% in 2024, +2.68% in 2023, +2.03% in 2022 and an average of +1.57% in 2011-2019. With the exception of 2020 (-5.29%), the last time there was a more powerful decline was in 2008 (-1.03%).

If we evaluate total retail sales for 5m25 to 5m24, growth of 4.3% in real terms, but fully realized due to June-December 2024, in 2025 everything is very bad.

In the structure of retail growth for 5m25 compared to 5m24:

•  1.39 p.p. or almost a third of the total growth comes from online trade

•  1.05 p.p. – cars and components

•  0.72 p.p. – catering

•  0.43 p.p. – medical goods and pharmaceuticals

•  0.36 p.p. – food products.

The above categories provide more than 2/3 of the total retail turnover.

A significant reduction in fuel costs, forming a negative contribution of 0.37 p.p. in the overall change in retail sales.

High annual rates of retail sales are supported by a fairly strong 2H24, but if things go as they did at the beginning in 2H25, the annual rates will begin to rapidly decline to zero.”

Just in case, we remind you that all these figures are official, taking into account the real inflation, which is 5-7 percent higher than the official one, the picture looks even sadder. It is safe to say that Powell gave up fighting inflation not because of Trump, but because he realized how hopeless this situation is.

In general, the only good thing is that, apparently, there will be no collapse until the end of the summer, so we wish our readers to rest peacefully and prepare for their vacation and, as far as possible, take measures to minimize the impact of the financial collapse on their business.