Monthly Economic Insights
Slower spending and economic expansion balanced by new market highs
Concerns about economic slowdowns due to tariffs have eased as consumer confidence and spending have rebounded in recent weeks. Inflation has edged higher modestly, job growth remains steady but subdued, and new tariffs are building pressure on prices and business planning.
Consumer prices rose 2.7% year‑over‑year in June, up from 2.4% in May. Core inflation also ticked upward, as goods such as durable items saw steeper price increases. Overall Personal Consumption Expenditures inflation forecasts in 2025 range from 2.3% to 2.7% year-over-year.
While some indicators show a slight easing in May 2025, the Federal Reserve remains concerned about somewhat elevated inflation. Factors like tariffs and potential trade wars are also influencing predictions.
In its June meeting, the Federal Reserve held the federal funds rate steady at 4.25–4.50%, signaling a cautious wait-and-see approach, with notable questions surrounding trade policy and consumer behavior. The median Fed expectation remains for two modest rate cuts later this year, although some policymakers foresee none or just one cut, depending on the risks to growth and inflation.
In June, the U.S. economy added 147,000 jobs, while the unemployment rate decreased to 4.1%, continuing to show stable levels and demand. Job growth was concentrated in the government and healthcare sectors, while manufacturing saw declines. Private sector hiring slowed, with the weakest showing since October 2024.
The Federal Reserve and other forecasters now expect GDP growth of around 1.4% in 2025, down from earlier estimates near 1.7%. Some Fed governors are concerned that first-half growth is tracking closer to 1%, and rate cuts may be delayed as inflation remains stubbornly high. The New York Fed anticipates unemployment rising to around 4.5% by year-end and inflation remaining near 3–3.5% before easing in 2026–2027.
Tariff policy continues to cloud the picture. Starting this year, the U.S. has raised its average applied tariff rate, including sweeping 25% duties on steel, aluminum, and autos, as well as a 10% baseline universal import tariff on nearly all goods, a historic high level.
Bottom Line: The economic environment still requires a cautious approach to cost management, pricing flexibility, and ensuring access to credit. Additional planning and scenario testing of trade policy shifts, inflation surges, and tighter credit conditions should also be part of cash flow planning, particularly in businesses where supply chains are vulnerable to sudden price increases.
Looking ahead, high confidence levels in ongoing stability will require a calibrated monetary policy, more clarity on trade outlooks, and disciplined fiscal execution in Washington. Until then, resilience will come from adhering to fundamentals such as managing costs, maintaining access to capital, and focusing on core strengths.
— Marcus Scott, CFA, CFP®, Chief Investment Officer (CIO) for Country Club Trust Company
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