Wall Street experienced a downturn last week. Investors were in a “risk-off” mood as the war in Iran escalated, while AI and semiconductor shares dropped, which dragged the overall market lower. Each of the major market indexes lost value, ending a streak of favorable weekly performances. Traders moved away from Megacap shares, which pulled prices lower. Energy, consumer staples, real estate, and financials outperformed, while information technology, consumer discretionary, and communication services declined. Crude oil extended its gains to above $81.00 per barrel, reaching its highest level in a month, after Iran and the U.S. each launched more military strikes.
Stock Market Indexes
Market/Index
2025 Close
Prior Week
As of 7/17
Weekly Change
YTD Change
DJIA
48,063.29
52,637.01
52,146.42
-0.93%
8.50%
NASDAQ
23,241.99
26,281.61
25,520.24
-2.90%
9.80%
S&P 500
6,845.50
7,575.39
7,457.69
-1.55%
8.94%
Russell 2000
2,481.91
2,977.81
2,962.22
-0.52%
19.35%
Global Dow
6,169.34
6,855.31
6,813.65
-0.61%
10.44%
fed. funds target rate
3.50%-3.75%
3.50%-3.75%
3.50%-3.75%
0 bps
0 bps
10-year Treasuries
4.16%
4.56%
4.54%
-2 bps
38 bps
US Dollar-DXY
98.26
100.96
100.77
-0.19%
2.55%
Crude Oil-CL=F
$57.46
$71.59
$81.69
14.11%
42.17%
Gold-GC=F
$4,323.90
$4,120.40
$4,014.30
-2.57%
-7.16%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week’s Economic News
The Consumer Price Index (CPI) decreased 0.4% in June after rising 0.5% in May, the U.S. Bureau of Labor Statistics reported. This decline was the largest one-month decrease since April 2020, when it fell 0.8%. Over the last 12 months, consumer prices increased 3.5%. Energy prices fell 5.7% in June after rising 3.9% in May. The drop in prices for energy was the largest contributor to the monthly CPI decrease, more than offsetting increases for shelter and food. Prices for food increased 0.2% in June, while shelter prices rose 0.1%. Over the last 12 months, food prices are up 3.0%, and shelter prices rose 3.3%. Core prices, excluding food and energy, were flat in June but up 2.6% over the last 12 months.
The Producer Price Index fell 0.3% in June, after advancing 0.6% in May and 1.1% in April. Producer prices increased 5.5% for the 12 months ended in June. The June decline can be attributed to prices for goods, which fell 1.4%, marking the largest decrease since July 2022. Leading the goods decrease in June was a 6.4% drop in energy prices (gasoline prices fell 12.0%). In contrast, prices for services rose 0.2% last month.
Retail sales rose 0.2% in June from the previous month and 6.7% from June 2025. Nonstore (online) retail sales rose 1.9% last month and 14.2% from a year ago. Conversely, gasoline sales fell 5.3% in June but were up 19.8% from a year earlier.
U.S. import prices increased 0.3% in June, following a 1.7-% advance in May. Higher prices for nonfuel imports more than offset lower prices for fuel imports in June. U.S. import prices advanced 7.1% for the 12 months ended in June, the largest 12-month increase since the prices rose 7.7% in August 2022. Prices for U.S. exports decreased 0.6% in June, after rising 1.2% the previous month. Export prices increased 10.2% from June 2025.
Industrial production (IP) ticked up 0.1% in June. Manufacturing output was unchanged in June. Mining and utilities both grew 0.4% in June. Total IP in June was 1.1% above its year-earlier level. Manufacturing increased 1.1% from June 2025. Mining increased 2.4% over the last 12 months, while utilities ticked up 0.3%.
According to the latest information, the government deficit was $120 billion in June, $172 billion less than the May deficit. Through nine months of the current fiscal year, the deficit sits at $1,367 billion, marginally above the deficit over the same period last fiscal year ($1,337 billion). Thus far in FY 2026, government receipts amounted to $4,151 billion, of which the primary contributors were individual income taxes ($2,196 billion), social insurance and retirement ($1,384 billion), and corporation income taxes ($279 billion). Custom duties (tariffs) accounted for $163 billion. Over the same period, government expenditures totaled $5,518 billion, of which Social Security payments ($1,244 billion) were the largest expenditures.
The number of issued residential building permits declined 3.0% in June and 2.3% from a year earlier. The number of building permits issued for single-family construction fell 2.4% last month. Conversely, the number of housing starts rose 19.0% in June and 3.5% from June 2025. Single-family housing starts in June were 0.2% below the May estimate. Housing completions in June were 3.3% above the May total and 1.5% above the June 2025 rate. Single-family housing completions in June were 6.6% above the May rate.
For the week ended July 11, there were 208,000 new claims for unemployment insurance, a decrease of 8,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 4 was 1.2%, unchanged from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 4 was 1,805,000, a decrease of 16,000 from the previous week’s level, which was revised up by 7,000. States and territories with the highest insured unemployment rates for the week ended June 27 were New Jersey (2.3%), Puerto Rico (2.3%), Rhode Island (2.2%), Minnesota (2.1%), Massachusetts (2.0%), Oregon (2.0%), California (1.9%), Washington (1.9%), Connecticut (1.7%), and Pennsylvania (1.7%). The largest increases in initial claims for unemployment insurance for the week ended July 4 were in California (+8,078), Missouri (+6,037), New York (+4,587), Michigan (+4,458), and Tennessee (+2,331), while the largest decreases were in New Jersey (-2,674), Connecticut (-2,619), Oregon (-2,284), Maryland (-1,223), and Florida (-1,218).
The national average retail price for regular gasoline was $3.855 per gallon on July 13, $0.078 per gallon above the prior week’s price and $0.725 per gallon higher than a year ago. Also, as of July 13, the East Coast price increased $0.065 to $3.765 per gallon; the Midwest price rose $0.131 to $3.662 per gallon; the Gulf Coast price climbed $0.080 to $3.423 per gallon; the Rocky Mountain price increased $0.162 to $3.823 per gallon; and the West Coast price ticked up $0.001 to $4.832 per gallon.
Eye on the Week Ahead
This is a slow week for the release of notable economic data. However, the June figures on new home sales, released by the Census Bureau, is out this Friday. May saw new home sales drop over 7.0%, although both the median ($424,900) and average ($540,600) sales prices increased from their respective prior months’ estimates.
Investors were somewhat skittish during the early part of last week as tensions in the Middle East intensified. However, stocks closed the week on an uptick following solid sessions last Thursday and Friday. After a brief retreat, tech shares led the market surge, supported by the New York market debut of a major South Korean chip manufacturer, which enjoyed the largest-ever U.S. market debut of a foreign firm. Several market sectors performed well, led by energy and information technology. Consumer discretionary, industrials, and materials lagged. Crude oil prices posted weekly gains despite slipping last Friday as disruptions in the Strait of Hormuz kept supply concerns elevated.
Stock Market Indexes
Market/Index
2025 Close
Prior Week
As of 7/10
Weekly Change
YTD Change
DJIA
48,063.29
52,900.07
52,637.01
-0.50%
9.52%
NASDAQ
23,241.99
25,832.67
26,281.61
1.74%
13.08%
S&P 500
6,845.50
7,483.24
7,575.39
1.23%
10.66%
Russell 2000
2,481.91
2,996.11
2,977.81
-0.61%
19.98%
Global Dow
6,169.34
6,853.28
6,855.31
0.03%
11.12%
fed. funds target rate
3.50%-3.75%
3.50%-3.75%
3.50%-3.75%
0 bps
0 bps
10-year Treasuries
4.16%
4.48%
4.56%
8 bps
40 bps
US Dollar-DXY
98.26
100.85
100.96
0.11%
2.75%
Crude Oil-CL=F
$57.46
$68.49
$71.59
4.53%
24.59%
Gold-GC=F
$4,323.90
$4,136.60
$4,120.40
-0.39%
-4.71%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week’s Economic News
The services sector experienced a modest increase in activity in June, supported by a faster increase in new business as firms responded to gradually stabilizing economic conditions. That said, inflationary pressures stayed elevated, despite easing since May, as tariffs and higher fuel prices increased costs to service providers. Nevertheless, confidence in the sector’s outlook improved in June to the highest since February.
Sales of existing homes fell 2.4% in June but were up 2.8% from a year earlier. Inventory of existing homes for sale sat at a 4.6-month supply, up from 4.5 months last month and unchanged from one year ago. The median existing home price in June was $440,600, 2.2% above the May price of $431,200 and 1.8% higher than the June 2025 price of $432,700. Sales of existing single-family homes declined 2.4% in June but increased 3.3% from a year earlier. The median existing single-family home price in June, at $446,400, was 2.2% above the May price of $436,400 and 1.8% higher than the June 2025 price of $438,600.
The international trade in goods and services deficit rose 42.2% in May to $77.6 billion. Exports declined 3.2%, while imports increased 3.3%. Year to date, the goods and services deficit decreased $203.9 billion, or 40.6%, from the same period in 2025. Exports increased $164.7 billion, or 11.7%. Imports decreased $39.2 billion, or 2.1%.
For the week ended July 4, there were 215,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 27 was 1.2%, unchanged from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 27 was 1,814,000, an increase of 8,000 from the previous week’s level, which was revised down by 8,000. States and territories with the highest insured unemployment rates for the week ended June 20 were Puerto Rico (2.5%), Minnesota (2.2%), New Jersey (2.1%), California (1.9%), Massachusetts (1.9%), Oregon (1.9%), Washington (1.9%), Rhode Island (1.8%), Illinois (1.6%), Nevada (1.6%), and Pennsylvania (1.6%). The largest increases in initial claims for unemployment insurance for the week ended June 27 were in New Jersey (+7,262), Connecticut (+2,503), Massachusetts (+1,823), New York (+1,373), and Oklahoma (+1,264), while the largest decreases were in California (-6,158), Pennsylvania (-2,995), Minnesota (-1,947), Wisconsin (-1,029), and Texas (-812).
The national average retail price for regular gasoline was $3.777 per gallon on July 6, $0.054 per gallon below the prior week’s price but $0.652 per gallon higher than a year ago. Also, as of July 6, the East Coast price decreased $0.042 to $3.700 per gallon; the Midwest price dipped $0.094 to $3.531 per gallon; the Gulf Coast price slid $0.022 to $3.343 per gallon; the Rocky Mountain price decreased $0.054 to $3.661 per gallon; and the West Coast price declined $0.088 to $4.831 per gallon.
Eye on the Week Ahead
Most of the attention this week will be focused on the latest inflation-related data with the releases of the Consumer Price Index and the Producer Price Index.
Last week’s trading session was shortened as the markets were closed on Friday, July 3, in honor of Independence Day. Wall Street saw a shift from AI and semiconductor stocks to more traditional blue-chip stocks. The major market mover was the labor report for June, which saw employment accelerate but at a slower pace than over the prior two months. Slowing job growth coupled with elevated inflation is likely to prompt the Federal Reserve to keep interest rates at their current range following their next meeting at the end of July. Each of the benchmark indexes listed here closed the week higher (with the exception of the Russell 2000), with health care, communication services, and financials outperforming. Ten-year Treasury yields ticked higher, while crude oil prices declined.
Stock Market Indexes
Market/Index
2025 Close
Prior Week
As of 7/2
Weekly Change
YTD Change
DJIA
48,063.29
51,876.11
52,900.07
1.97%
10.06%
NASDAQ
23,241.99
25,297.62
25,832.67
2.12%
11.15%
S&P 500
6,845.50
7,354.02
7,483.24
1.76%
9.32%
Russell 2000
2,481.91
3,010.08
2,996.11
-0.46%
20.72%
Global Dow
6,169.34
6,791.16
6,853.28
0.91%
11.09%
fed. funds target rate
3.50%-3.75%
3.50%-3.75%
3.50%-3.75%
0 bps
0 bps
10-year Treasuries
4.16%
4.37%
4.48%
11 bps
32 bps
US Dollar-DXY
98.26
101.31
100.85
-0.45%
2.64%
Crude Oil-CL=F
$57.46
$69.55
$68.49
-1.52%
19.20%
Gold-GC=F
$4,323.90
$4,086.80
$4,136.60
1.22%
-4.33%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week’s Economic News
Employment rose by 57,000 in June, well below the increases for April (148,000, revised) and May (129,000, revised) but higher than the average monthly change over the prior 12 months (+36,000). In June, the labor force participation rate fell 0.3 percentage point to 61.5%. The employment-population ratio declined 0.2 percentage point to 59.0%. The unemployment rate dipped 0.1 percentage point to 4.2%. The total number of unemployed, at 7.1 million, decreased 213,000 from the prior month. The number of long-term unemployed (those jobless for 27 weeks or more) changed little at 1.9 million in June but was up by 286,000 over the year. The long-term unemployed accounted for 27.3% of all unemployed people in June. Last month, average hourly earnings rose by $0.13, or 0.3%, to $37.64. Over the year, average hourly earnings have increased by 3.5%. The average workweek was unchanged at 34.3 hours in June.
In May, the number of job openings, at 7.6 million, was unchanged from the prior month. The number of hires, at 5.2 million, was also unchanged in May. Total separations, which include quits, layoffs and discharges, and other separations, at 5.1 million, rose by 63,000 in May. The number of job openings for April was revised down by 33,000 to 7.6 million, the number of hires was revised up by 99,000 to 5.2 million, and the number of total separations was revised up by 60,000 to 5.0 million.
Manufacturing continued to improve in June but at a slower pace than in the prior month. Growth was commonly linked to new product launches, alongside some reports of pre-orders placed to protect against rising prices. Higher raw material costs drove another steep rise in input costs, albeit one that was softer than May’s recent high. Selling price inflation also eased, falling to a three-month low. Employment remained a weak point at the end of the second quarter. Job cuts grew at the fastest pace since May 2020 and, excluding the pandemic, were the quickest since October 2009. Nevertheless, the S&P Global US Manufacturing Purchasing Managers’ Index™ registered 53.9 in June, down from 55.1 in May. However, the latest reading marked the 1th consecutive month above the crucial 50.0 threshold and signaled a solid improvement in operating conditions.
For the week ended June 27, there were 215,000 new claims for unemployment insurance, a decrease of 1,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended June 20 was 1.2%, unchanged from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended June 20 was 1,814,000, an increase of 2,000 from the previous week’s level, which was revised down by 9,000. States and territories with the highest insured unemployment rates for the week ended June 13 were Minnesota (2.1%), Puerto Rico (2.1%), New Jersey (2.0%), California (1.9%), Washington (1.9%), Massachusetts (1.8%), Oregon (1.7%), Illinois (1.6%), Nevada (1.6%), and Rhode Island (1.6%). The largest increases in initial claims for unemployment insurance for the week ended June 20 were in New Jersey (+3,847), Oregon (+1,933), Connecticut (+1,585), Maryland (+1,025), and Wisconsin (+620), while the largest decreases were in Minnesota (-4,770), Pennsylvania (-3,303), Illinois (-2,629), Texas (-1,794), and Ohio (-1,459).
The national average retail price for regular gasoline was $3.831 per gallon on June 29, $0.083 per gallon below the prior week’s price but $0.667 per gallon higher than a year ago. Also, as of June 29, the East Coast price decreased $0.035 to $3.742 per gallon; the Midwest price dipped $0.098 to $3.625 per gallon; the Gulf Coast price slid $0.116 to $3.321 per gallon; the Rocky Mountain price decreased $0.130 to $3.715 per gallon; and the West Coast price declined $0.138 to $4.919 per gallon.
Eye on the Week Ahead
The first full week of July brings with it the latest information on the services sector, the trade deficit, and sales of existing homes.
The Markets (second quarter through June 30, 2026)
Wall Street enjoyed a solid quarter of growth during a period of time that was anything but stable. April, May, and June saw a de-escalation in a major conflict, a reaffirmation of the independence of the central bank from political pressure, strong corporate earnings, a resilient consumer, and a U.S. economy that continued to expand, despite several tumultuous developments. Both the S&P 500 and the NASDAQ enjoyed their strongest quarters since 2020. The gains posted by the Dow put that index on track for its best first half in about five years and its biggest quarter since 2022. The quarter opened with investors still digesting tariff uncertainty and the ongoing U.S.-Iran conflict, which pushed energy prices higher and raised concerns about the efficacy of risk assets. There were concerns that equities were overvalued, while volatility increased as investors tried to price in the possibility of prolonged disruption to global trade and shipping routes. However, news of U.S.-Iran peace talks and a ceasefire in the Strait of Hormuz helped defuse one of the quarter’s biggest concerns. The reopening of key shipping lanes and the prospect of more stable energy markets supported risk appetite, with stocks moving higher.
Stock Market Indexes
Market/Index
2025 Close
As of June 30
Monthly Change
Quarterly Change
YTD Change
DJIA
48,063.29
52,319.20
2.52%
12.90%
8.85%
NASDAQ
23,241.99
26,213.72
-2.81%
21.41%
12.79%
S&P 500
6,845.50
7,499.36
-1.06%
14.87%
9.55%
Russell 2000
2,481.91
3,024.37
3.60%
21.15%
21.86%
Global Dow
6,169.34
6,823.89
-1.09%
9.60%
10.61%
fed. funds target rate
3.50%-3.75%
3.50%-3.75%
0 bps
0 bps
0 bps
10-year Treasuries
4.16%
4.41%
-4 bps
10 bps
25 bps
US Dollar-DXY
98.26
101.15
2.24%
1.29%
2.94%
Crude Oil-CL=F
$57.46
$70.05
-20.28%
-30.99%
21.91%
Gold-GC=F
$4,323.90
$4,026.50
-11.95%
-14.34%
-6.88%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Information technology and communication services were the sector leaders as investor enthusiasm for AI drove much of the market. Industrials, real estate, financials, and health care also made notable strides by the end of the second quarter.
The U.S. bond market spent much of the second quarter oscillating between rising and falling yields, influenced by resilient growth, stubborn inflation, and a cautious Federal Reserve. Treasury yields drifted higher in the second quarter as energy-linked inflation coupled with fading hopes for near-term fiscal easing ultimately pushed yields up but not without periods of decline. The 10-year Treasury yield spent most of the quarter swaying within a volatile 4.0%-4.5% range. The two-year note also ebbed and flowed for much of the quarter. However, the yield curve (the 10-year yield minus the 2-year yield) shifted from a prolonged inversion into positive territory.
According to FactSet, following a blowout Q1 in which S&P 500 companies posted 28.6% earnings growth (the highest since 2021), corporate profits are expected to carry strong momentum into the second quarter. Since the start of Q2 earnings season in mid-July, analysts are projecting a year-over-year growth rate of 20.6%-21.3% for the S&P 500. Corporate America remains resilient despite market anxiety surrounding sticky inflation and a potential Federal Reserve interest rate hike in September.
The second quarter of 2026 proved to be a difficult period for gold, which endured its worst quarterly performance in 13 years. After hitting an all-time high of $5,589.38 per ounce in late January, gold prices steadily declined. Gold began Q2 at about $4,700.00 per ounce, only to slide to under $4,030.00 per ounce by the end of June, marking the first negative quarterly performance in the last 11 quarters. Typically, the tensions in the Middle East would trigger a flight to safety, boosting gold. However, surging crude oil prices stoked fears of inflation and evaporated projected interest rate cuts by the Federal Reserve, which dampened interest in non-yielding gold and other precious metals.
To describe the second quarter as a roller-coaster ride for energy markets would be an understatement. Volatility in the Middle East sent crude oil prices surging to near four-year highs in April. However, a diplomatic compromise, including the reopening of the Strait of Hormuz, led to a massive reduction in crude oil prices throughout June. April saw prices rise to a 46-month high of nearly $113.00 per barrel, more than double the price at the start of the year. Escalating crude oil prices impacted consumers at the pumps, where gasoline prices climbed to a national average of over $4.00 per gallon. In mid-May, peace talks slowed price increases, culminating in a ceasefire agreement in mid-June, which resulted in the rapid deflation of crude oil prices to about $70.00 per barrel by the end of the quarter. The retail price for regular gasoline was $3.914 per gallon on June 22, $0.561 below the price at the end of May but $0.701 more than the price a year ago. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.49% as of June 25. That’s up from 6.38% at the end of March but under the 6.77% rate from a year earlier.
Despite persistent inflation, tighter financial conditions, and geopolitical tensions, the U.S. economy showed surprising resilience. Gross domestic product held steady at an annualized rate of 2.1% during the quarter. While growth was modest, it exceeded fears of an economic contraction that prevailed throughout the end of the first quarter. The conflict in the Middle East, beginning in mid-March, had a ripple effect throughout the economy. Crude oil prices rapidly increased, inflationary pressures were felt for both products and services, and consumer spending retreated. Employment growth, which cooled in the first quarter, exceeded expectations in the second quarter, with job gains averaging 175,500 for April and May. The unemployment rate remained at 4.3% for April and May.
Inflationary pressures, which had stabilized somewhat in the first quarter, made a supply-driven return in the second quarter. Driven by rising energy prices, the Consumer Price Index spiked to an estimated annualized average of 6.0% for the quarter, while core prices hovered around 3.2%. The personal consumption expenditures price index peaked near 3.8% during the second quarter. In response, the Federal Reserve, under new leadership, maintained the federal funds target rate range but is expected to hike rates during the remainder of the year in an attempt to rein in rising prices.
Latest Economic Reports
The following section contains a review of the latest economic data available as of June 30, 2026.
Employment: Job growth exceeded expectations for the second consecutive month in May as employment rose by 172,000 after increasing 179,000 (revised) in the previous month. The change in employment for March was revised up by 29,000 to 214,000, and the change for April was revised up by 64,000 to 179,000. With these revisions, employment in March and April combined was 93,000 higher than previously reported. The unemployment rate was 4.3% in May, unchanged from the previous month’s rate and from May 2025. The number of unemployed persons in May was 7.3 million, which was essentially unchanged from the previous month and from May 2025. The number of long-term unemployed (those jobless for 27 weeks or more), at 2.0 million in May, rose 155,000 from the April rate and accounted for 27.5% of all unemployed persons. The total number of long-term unemployed in May was about 524,000 more than the estimate from a year earlier. The labor force participation rate, at 61.8% in May, was unchanged from the April rate and was 0.6 percentage point below the rate from a year earlier. The employment-population ratio in May, at 59.2%, increased 0.1 percentage point from April but was 0.5 percentage point below the May 2025 estimate. In May, average hourly earnings increased by $0.12, or 0.3%, to $37.53. Over the past 12 months ended in May, average hourly earnings rose by 3.4%, down 0.2 percentage point from the 12 months ended in April 2026 (3.6%). The average workweek was unchanged at 34.3 hours last month.
There were 215,000 initial claims for unemployment insurance for the week ended June 20, 2026. During the same period, the total number of workers receiving unemployment insurance was 1,821,000. The insured unemployment rate was 1.2%, 0.1 percentage point below the rate a year earlier. A year ago, there were 236,000 initial claims, while the total number of workers receiving unemployment insurance was 1,960,000.
FOMC/interest rates: As expected, the Federal Open Market Committee (FOMC) left the federal funds target rate range unchanged at its current 3.50%-3.75%. Following its first meeting under new Fed chair Kevin Warsh, the Committee’s statement, which was much briefer than in the past, indicated that economic activity was moving at a solid pace and that inflation remained elevated.
GDP/budget: The rate of economic expansion accelerated somewhat in the first quarter of 2026, with gross domestic product (GDP) rising 2.1%, according to the third and final estimate from the Bureau of Economic Analysis. In the fourth quarter, GDP rose 0.5%. Compared to the fourth quarter, the increase in GDP in the first quarter reflected advances in government spending (-5.6% to +4.4%) and exports (-3.2% to +10.9%) and a deceleration in consumer spending (+1.9% to +0.5%) that were partly offset by an acceleration in investment (+2.3% to +7.9%). Consumer spending, as measured by personal consumption expenditures, is the primary driver of GDP. In the first quarter, spending on both goods and services each rose 0.5%.
May 2026 saw the federal budget register a deficit of $239 billion following April’s $215 billion surplus, which was driven by large individual tax deposits. A year earlier, the surplus was $316 billion. In May, receipts totaled $356 billion, while expenditures were $628 billion. Over the eight months of the current fiscal year, the government deficit sits at $1,246 billion, $118 billion less than the cumulative deficit over the same period of the previous fiscal year. Over the same eight months, individual income taxes, at $1,913 billion, accounted for more than half of the total receipts of $3,656 billion. Total expenditures for this fiscal year equal $4,902 billion, of which Social Security ($1,097 billion) was the largest outlay.
Inflation/consumer spending: According to the latest Personal Income and Outlays report, both personal income and disposable (after-tax) personal income each rose 0.7% in May from April. Personal consumption expenditures increased 0.7%. Consumer prices, as measured by the PCE price index, rose 0.4% in May, the same increase as in April. Excluding food and energy, the PCE price index increased 0.3% in May. From the same month one year ago, the PCE price index increased 4.1% (3.8% for the 12 months ended in April). Excluding food and energy, the PCE price index increased 3.4% from May 2025 (3.3% for the year ended in April).
The Consumer Price Index (CPI) advanced 0.5% in May and 4.2% over the last 12 months, 0.4 percentage point higher than for the 12 months ended in April. Energy prices, which drove the overall surge in CPI, rose 3.9% in May and 23.5% over the last 12 months. Gasoline prices increased 7.8% in May and 40.5% since May 2025. Shelter prices increased 0.3% in May and 3.4% since May 2025. Food prices rose 0.2% in May and 2.7% over the last 12 months. Prices less food and energy rose 0.2% in May and 2.9% over the last 12 months.
The latest data reveals that the Producer Price Index increased 1.1% in May, unchanged from the revised April estimate. Producer prices increased 6.5% over the last 12 months, the largest 12-month advance since the 12 months ended November 2022. In May, prices for goods rose 2.8% from the previous month, which accounted for nearly 80.0% of the overall increase. Gasoline prices rose 23.4% in May. Prices for services increased 0.3% in May. For the year, producer prices for goods rose 10.4%, while prices for services advanced 4.9%. Excluding foods and energy, prices increased 0.4% in May and 4.9% over the year. Excluding foods, energy, and trade services, producer prices moved up 0.8% in May and 5.1% since May 2025.
Housing: Existing home sales increased 3.2% in May and 3.2% from a year ago. Inventory of existing homes for sale in May, at a 4.5-month supply, was unchanged from the prior month’s estimate. The median sales price in May was $429,300, up from the April estimate of $417,500, and greater than the May 2025 price of $423,700. Sales of existing single-family homes rose 3.5% in May and 3.3% from May 2025. The median sales price for existing single-family homes in May was $434,300, up from the previous month’s price of $421,900, and higher than the May 2025 price of $428,800.
The most recent data shows sales of new single-family houses in May 2026 were 7.3% below the April rate and 6.8% under the May 2025 estimate. Inventory of new single-family homes for sale in May represented a supply of 10.3 months at the current sales rate, 10.8% above the April estimate and 6.2% over the May 2025 figure. The median sales price of new houses sold in May 2026 was $424,900. This was 2.0% above the April price and unchanged from the May 2025 price. The average sales price of new houses sold in May 2026 was $540,600. This was 7.8% above the April price and 5.0% higher than the April 2025 figure.
Manufacturing: Industrial production (IP) ticked up 0.1% in May after rising 0.9% in April. IP was 1.7% above its year-earlier level. Manufacturing output was unchanged from the prior month last month but 1.4% above the May 2025 estimate. In May, the index for mining rose 1.3% and was up 2.0% from last year, while the index for utilities decreased 0.4% in May but was 3.1% over the May 2025 estimate.
According to the latest report from the Census Bureau, new orders for durable goods decreased $15.6 billion, or 4.5%, in May following an 8.5% April advance. Excluding transportation, new orders increased 1.3%. Excluding defense, new orders decreased 4.6%. Transportation equipment led the May decrease, falling $18.5 billion, or 14.0%.
Imports and exports: U.S. import prices increased 1.9% in May, according to the latest report from the Bureau of Labor Statistics. Prices for exports increased 1.3% in May. Over the 12 months ended in May, import prices rose 6.7%, the largest over-the-year advance since import prices rose 7.7% in August 2022. Export prices increased 11.2% since May 2025, the largest over-the-year increase since export prices rose 11.2% in August 2022.
The international trade in goods deficit was $105.8 billion in May, up $22.7 billion, or 27.4%, from April. Exports of goods for May were $207.7 billion, $11.8 billion, or 5.4%, less than April exports. Imports of goods for May were $313.4 billion, $10.9 billion, or 3.6%, more than April imports.
The latest information on international trade in goods and services, released June 9, 2026, was for April and revealed that the goods and services trade deficit was $55.9 billion, a decrease of $0.7 billion, or 1.2%, from the March deficit. April exports were $327.1 billion, $8.3 billion, or 2.6%, more than March exports. April imports were $383.0 billion, $7.6 billion, or 2.0%, above the March estimate. Year to date, the goods and services deficit decreased $213.5 billion, or 49.1%, from the same period in 2025. Exports increased $128.2 billion, or 11.3%. Imports decreased $85.3 billion, or 5.5%.
International markets: June saw strong stock market performances in Europe and Asia, driven by easing energy costs and a continuing surge in AI shares. European equities had their strongest quarterly performance since the three months ended October 2020. Asian stock markets enjoyed their strongest quarter in 17 years. By the end of June, the STOXX Europe 600 Index rose 2.5% for the month and 9.9% for the second quarter; the United Kingdom’s FTSE ticked up 1.7% for the month and 3.7% for the second quarter; Japan’s Nikkei 225 Index gained 5.0% in June and 37.2% in the second quarter; and China’s Shanghai Composite Index ticked up 0.5% in June and 5.2% in the second quarter.
Consumer confidence: The Consumer Confidence Index inched up in June to 91.2 from 90.6 in May. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, decreased by 3.0 points to 116.4. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, rose by 3.0 points to 74.4.
Eye on the Quarter Ahead
Economic uncertainty remains elevated heading into the third quarter. While the labor market has shown strength, inflation remains “sticky,” as geopolitical instability continues to be a key variable.
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