Daily macro update

US: NFIB Small Business optimism (Jun): 98.6 as expected (prior: 98.6)

• Sentiment among US small businesses dipped slightly in June, as concerns over taxes persisted during the month of June.
• The decline was primarily due to rising inventories: owners now see stockpiles as too high. Compagnies have struggled to manage inventories with the administration's rapidly changing policies on tariffs.
• Moreover, the falling outlook for better conditions drove the headline number lower.

Germany: Trade Balance (May): 18.4bn EUR vs 15.5bn expected (prior: 15.7bn revised from 14.6bn)

• Germany's trade surplus expanded. This growth occurred as exports declined less sharply than imports. Exports dropped by 1.4% m/m to a four-month low of €129.4 bn, a steeper fall than the anticipated 0.2%, largely due to decreased sales to the US and China.
• Exports to the US plummeted by 7.7%, hitting their lowest point since March 2022, impacted by tariffs from the Trump administration. Meanwhile, imports fell by 3.8% to a five-month low of €111.1 bn, reversing April's revised 2.2% increase and exceeding forecasts of a 0.9% decline. The reduction was mainly driven by decreased imports from both EU countries (-3.6%) and non-EU countries (-4.1%).

Eurozone: Retail sales (May): -0.7% m/m vs -0.6% expected (prior: 0.3% revised from 0.1%)

• Y/y: 1.8% vs 1.4% expected (prior: 2.7% revised from 2.3%)
• April's data was revised higher so that the yearly change is better than expected. Encouragingly as well, the three-month/three-month annualised growth rate is slightly higher at 2.2%.

Germany: Industrial production (May): 1.2% m/m vs -0.2% expected (prior: -1.6% revised from -1.4%)

• IP y/y: 1.0% vs -0.3% expected (prior: -2.1% revised from -1.8%)
• Despite last Friday’s weak factory sales data, industrial production was robust in May so that the April-May average is now 0.7% annualised above the Q1 level for total IP (which includes construction) and 2.4% annualised higher for manufacturing.

Eurozone: PPI (May): -0.6% m/m as expected (prior: -2.2%)

• PPI y/y: 0.3% as expected (prior: 0.7%)
• Inflationary pressures continue to ease in the eurozone.

France: Industrial production (May): -0.5% m/m vs 0.3% expected (prior: -1.4%)

• IP y/y: -0.9% vs 0.1% expected (prior: -1.9%)
• Industrial production unexpectedly declined in May with manufacturing production down 1% m/m and down 0.1% y/y.

Germany: Factory orders (May): -1.4% m/m vs -0.2% expected (prior: 1.6% revised from 0.6%)

• Y/y: 5.3% vs 5.7% expected (prior: 5.8%, revised from 4.8%)
• Industrial orders fell in May, but they are still significantly up in Q2, helped by some upward revisions to prior months.
• Orders have been very uneven at a sector level, with weakness mainly in terms of domestic orders.

Switzerland: Unemployment rate (sa) (June): 2.9% (prior: 2.8% revised from 2.9%)

• The unemployment rate remains on an upward trend after having bottomed just under 2% in H1 2023.

US: Non-farm payrolls (Jun): 147k vs 106k expected (prior: 144k revised from 139k)

• The US economy added more jobs than expected, primarily driven by state government and health care sectors. In contrast, the federal government continued to shed jobs.
• The unemployment rate unexpectedly dipped to 4.1% from 4.2%, while wage growth slowed to 0.2% from 0.4%. Annually, wages grew by 3.7%, down from 3.9%.
• The recent decline in the unemployment rate appears to be driven by a shrinking labor force. The participation rate unexpectedly fell from 62.4% to 62.3%, suggesting that the change is more about supply-side dynamics than increased demand for workers.
• Initial jobless claims came lower than expected (233k vs. 241k) while continuing claims stabilized at 1964k.
• So far, there are few signs of the trade war is hitting payrolls.
• This seemingly robust report diminishes the likelihood of a July rate cut by the Fed, amid concerns about a weakening labor market. Instead, it supports a cautious, wait-and-see approach. We expect two rate cuts in the fourth quarter.

US: Trade balance (May): -71.5 bn USD vs -71.0 bn expected (prior: -60.3 bn revised from -61.6 bn)

• The US trade deficit widened unexpectedly, driven by a 4% drop in exports, while imports saw a slight decrease of 0.1%.
• Significant declines in exports were observed in nonmonetary gold, natural gas, and finished metal shapes.

US: ISM Services (Jun): 50.8 vs 50.6 expected (prior: 49.9)

• The ISM services index surprised by rising above the 50 level, signaling expansion after a month of contraction.
• Key areas showed strong rebounds: business activity increased to 54.2 from 50, new orders rose to 51.3 from 46.4, inventories climbed to 52.7 from 49.7, and new export orders improved to 51.1 from 48.5.
• Although price pressures eased slightly, with the index at 67.5 compared to 68.7, concerns about rising operational costs were more frequent.
• Middle East tensions emerged in June's commentary, yet no supply chain disruptions were reported.

US: Factory orders (May): 8.2% m/m as expected (prior: -3.9% revised from -3.2%)

• New orders for US manufactured goods surged in May, and more than offset the revised 3.9% decline from previous month.
• According to the US Census Bureau, firms likely took advantage of the suspension of "Liberation Day" tariffs by the US government to front-load orders before the escalation with China and the broader potential resumption in July.

 Switzerland: CPI (Jun): 0.1% m/m vs -0.1% expected (prior: -0.1%)

• Swiss headline inflation exceeded expectations, aligning the Q2 average with the SNB's forecast of 0%.
• Both domestic and imported inflation rose, with domestic inflation increasing by 0.1 pp to 0.7%, and imported inflation climbing by 0.5 pp to 1.9%. The rise in imported prices may be influenced by the CHF appreciation against the USD.
• This print supports the SNB's stance from their June meeting: the threshold for implementing negative interest rates remains high, barring a significant downturn in the macroeconomic outlook. Chairman Schlegel emphasized that negative rates are reserved for "exceptional times".
• However, a substantial escalation in trade tensions or a significant narrowing of the rate differential with the ECB, leading to further CHF appreciation, could increase the likelihood of negative interest rates.

Eurozone: Services PMI (Jun F): 50.5 vs 50.0 expected (prior: 49.7)

• Final print of the eurozone services PMI has been revised higher from the flash estimate of 50 and firmly above the initial market expectations of 50 to reflect a slight expansion in the area's services activity.
• Composite was also revised higher to 50.6 from 50.2.

UK: Services PMI (Jun F): 52.8 vs 51.3 expected (prior: 50.9)

• Final estimation reveals a rapid expansion in the country's services sector, the strongest since August 2024, driven by renewed improvements in order books.
• New orders saw a slight increase, marking the second rise this year and achieving the fastest growth rate since November 2024, fueled by heightened domestic demand.
• Despite this growth, employment in the sector continues to contract significantly, hindered by rising payroll costs and weak capacity pressures.