As ECB Stimulus Debate Heats Up, Consumers in the US Are Stepping Out and Paying Bills

ECB: The coming week is filled with a slew of catalysts that stem from a deadline for completing a bipartisan infrastructure package, persistent fears over a global delta variant, widespread inflationary pressures, central bank rate decisions, and a busy week of P&L. The main event will be the ECB rate decision and the press conference. This will be the first meeting since the revision of their strategy aimed at a slightly higher inflation target. The gap appears to be widening at the ECB over stimulus advice, a sign that the hawks will push for a tighter policy in the fall.

The trading week on Wall Street has been very volatile after a mixed start to the earnings season, a dovish semi-annual monetary reading from Fed Chairman Powell, and waning consumer confidence in the US. As the dust settled, the dollar strengthened, Treasury yields fell, but confidence in risky assets began to wane. The second week of reports will provide a broader look at several sectors of the economy, which may support the argument that inflation looks more resilient.

Wall Street will keep a close eye on every development of the bipartisan infrastructure proposal on Capitol Hill. Senate Majority Leader Schumer will try to meet his ambitious deadline for this bill to pass. A key procedural step is due on Monday, and it could lead to an initial vote on Wednesday on the $579 billion infrastructure deal.

Consumers in the US Are Stepping Out and Pay Bills

In recent months, the biggest price increases have been for “travel-related items.” After a year near home, Americans are on the road again. The demand for travel-related goods and services is outstripping the industry’s capabilities, and prices are rising very rapidly. The shortage of semiconductors has led to higher prices for both new and used cars, which have a direct impact on car rental prices. At the same time, prices for hotels, flights, and car rentals are recovering from the sharp drop in prices at the start of the pandemic.

Evidence of a shift in the consumer model as the economy recovers was also seen in June retail data. Total sales grew 0.6% m/m, exceeding market expectations. Sales in bars and restaurants, as well as in clothing and accessories stores, have grown dramatically – categories that could be called “going out”.

If you look at the tendency in this category to ‘leave’, expenses began to grow in March and are now exceeding the pre-pandemic level. On the other hand, spending on things related to staying at home has dropped since March – furniture, building materials, sporting goods, and hobbies.