In June, the Jibun Bank Services PMI unexpectedly dropped from 53.8 to 49.8, marking the first contraction since August 2022. This decline was accompanied by a slower rise in output prices, the slowest in seven months.
Given these economic indicators, the Bank of Japan (BoJ) may need to reconsider its approach and focus on the impact of a weak Japanese Yen. This could lead to a potential rate hike to strengthen the Yen, consumer price trends, and the overall economy.
The question arises whether the BoJ board members will agree on the necessity of monetary policy adjustments to address the weakening Yen. Meanwhile, the US consumer confidence numbers could influence the Federal Reserve’s rate decisions.
The upcoming CB Consumer Confidence Index release on Tuesday is expected to show a decrease from 102.0 to 100.0 in June. If the index falls below 100 for the first time since July 2022, it may increase speculation about a Fed rate cut in September.
A notable drop in consumer confidence could dampen consumer spending, potentially alleviating inflation pressures driven by demand. This could pave the way for the Fed to lower interest rates in order to stabilize prices.
A larger-than-expected decline in the index could reignite concerns about a possible economic slowdown in the US. Consumer spending plays a significant role in the US economy, with private consumption contributing 67.6% in March 2024. A sharp decrease in consumption could have adverse effects on the economy.
Dana M. Peterson, Chief Economist at the Conference Board, linked the drop in the CB Consumer Confidence Index below 100 in April 2024 to consumer apprehensions about inflation.