The softer summer inflation prints extended into July, briefly convincing markets that the Fed was done. That changed with Chair Warsh’s hawkish Jackson Hole debut on 28 August, which put a September hike back on the table and sent the front end of the curve sharply higher. On the labour market front, July payrolls turned negative and the prior two months were revised down by over 100k.

July headline CPI rose just 0.1% month-on-month, following June's 0.4% decline, leaving the annual rate at 3.4%. Core CPI rose 0.2% and eased to 2.5% year-on-year, from 2.6%. As in June, the benign headline was flattered by energy, down 1.5% on the month, though still up almost 15% for the year. The Fed's preferred core PCE held at 3.3%, and PPI was unchanged month-on-month, easing to 4.7% year-on-year from 5.5%. The July ISM prices index eased for a third straight month to 71.1 from 73.0, but has now signalled rising input costs for 22 months, while headline manufacturing jumped to 55.6 from 53.3, its highest since May 2022.

Growth and labour diverged, with US GDP growth for Q2 printing at 1.5% (down from 2.1%), while consumption was revised up to 3.4%. July non-farm payrolls fell by 23k, marking the first decline in nine months and a miss of the 80k gain expected. Additionally, the May and June numbers were revised down by a combined 103k. The unemployment rate ticked down to 4.1%, but for the wrong reasons, as participation fell to 61.4%, a five-year-plus low. Wages cooled further, with average hourly earnings up just 3.2% year-on-year, the softest since May 2021. July retail sales fell 0.6%, mainly due to lower gasoline receipts (-0.9%).

UK inflation surprised to the upside, with July CPI accelerating to 2.9%, from 2.6%, driven almost entirely by a 13% rise in the Ofgem energy price cap. The composition was more reassuring than the headline: services inflation, the BoE's key metric, eased to 3.4% from 3.6%, while core CPI held at 2.6%. The re-acceleration was concentrated in energy and housing, exactly as we flagged last month.

Q2 GDP rose 0.4% (from 0.6%), in line with expectations, with services (+0.5%) the main driver. June monthly GDP rose 0.3%, well above the flat consensus, helped by the World Cup and the second-warmest June on record. The August PMIs firmed, with services at a six-month high of 52.8, though manufacturing slipped to a five-month low of 51.5. 

The BoE did not meet in August; at its 30 July meeting, it held Bank Rate at 3.75% on a 6-3 vote (three favouring a hike to 4%), with the next deciding vote on 17 September. 

As with the Fed, the softer services buy time, but with the energy cap and refined products pushing higher, the next prints are almost certain to be higher.

China's activity data disappointed across the board at the start of H2. July retail sales grew just 0.6% year-on-year, from 1.0% and short of the 1.5% expected, while industrial output slowed to 4.5%, from 5.3%. Property stayed the epicentre: fixed-asset investment fell 6.7% in the first seven months (worse than the 5.7% in H1 2026), dragged down by a 19% collapse in real-estate investment. New home prices fell 3.3% year-on-year, marking the 37th straight monthly decline; however, it was the mildest since February. Shanghai (+3.0%) again stood alone as the only bright spot. 

Unlock the entire report by becoming a Premium Member

Disclaimer

Wizard of Soho LLC and Weekly Wizdom publish financial information based on research and opinion. We are not investment advisors, and we do not provide personalized, individualized, or tailored investment advice, nor do we provide legal advice or information. The publisher does not guarantee the accuracy of the information provided on this page. All statements and expressions presented are based on the author's or paid advertiser's opinion and research. Directly or indirectly, no opinion is an offer or solicitation to buy or sell the securities or financial instruments mentioned.

As news is ever-changing, the opinions included should not be taken as specific advice on the merits of any investment decision. Investors should conduct their own investigation and review of publicly available information to make decisions about the prospects of any company discussed. Any projections, market outlooks, or estimates herein are forward-looking and inherently unreliable. They are based on assumptions and should not be construed as indicative of actual events.

Contrarily, other events that were not considered may occur and significantly affect the returns or performance of the securities discussed herein. The information provided is based on matters as they exist on the date of preparation and does not consider future dates. As a result, the publisher undertakes no obligation to correct, update, or revise the material in this document or provide any additional information. The publisher, its affiliates, and clients may currently or foreseeably have long or short positions in the securities of the companies mentioned herein. They may therefore profit from fluctuations in the price of the securities. There is, however, no guarantee that such persons will maintain these positions. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile, or any other means is illegal and punishable.

Neither the publisher nor its affiliates accepts any liability for any direct or consequential loss arising from any use of the information contained herein. By using the website or any affiliated social media account, you consent and agree to this disclaimer and our terms of use.