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Brew Markets

Macro Economics

Lucy Brewster

brewmarkets.com

Just when everyone’s gotten comfortable with the idea of rate cut relief arriving in September, a new economic report comes along and pours cold water on those hopes.

 price index rose 2.6% from a year ago, according to the Commerce Department, while core inflation rose 2.9% annually. Although in-line with forecasts, core inflation rose 0.3% from June, and had the highest annual increase since February.

 Core inflation, which strips out fickle food and energy costs, is the Federal Reserve’s favorite inflation barometer. Given the latest PCE reading flies high above the Fed’s target rate of 2%, our sympathies go out to Fed Chair Jerome Powell, who is slated to deliver a highly fraught decision on whether the central bank will cut benchmark interest rates at its next meeting September 16–17.

Consumer spending also inched upward this month by 0.5%, while personal income accelerated by 0.4%, both as expected. This suggests that Americans are still opening their wallets, despite tariff-induced higher prices—though some analysts note that consumers bought a lot of cars and 

Still, the odds that shoppers will continue spreading their money around seem to be dwindling: 

 dropped in August to 58.2 from July’s 61.7, according to the University of Michigan. That’s the first drop in four months, and the lowest reading in three months—a sign that Americans are starting to flinch at the price creep they’re seeing in stores. Over the next year, consumers expect prices to rise by 4.8%, up from 4.5% last month.

“The core PCE inflation reading adds complexity to the Fed’s path forward,” Falcon Wealth Advisors founder Jake Falcon told Brew Markets. “While the number was in line with expectations, it still sits above the Fed’s target, which means policymakers may hesitate to cut rates in September despite earlier signals of easing. That said, I believe the Fed is still leaning toward a rate cut, albeit cautiously. I expect a modest rate cut in September, followed by a wait-and-see approach through the year end.”

More crucial data will arrive with next Friday’s jobs report, which will reveal whether cracks in the labor market are healing or deepening.

“Fed policy for the rest of the year is going to be a balancing act between inflation and the health of the jobs market,” said Glenmede Vice President of Investment Strategy Mike Reynolds. “For now, those scales continue to tip toward concern for the latter, absent something completely out of left field over the next few weeks. This supports the base case of two to three rate cuts by year-end.”

In addition to weighing the tradeoffs of high inflation versus a weakening job market, the Fed has been grappling with a new onslaught from President Trump, who 

 Governor Lisa Cook. So far, she’s refused to budge, although we’d bet she’s really looking forward to a beer or three over this long Labor Day weekend before she heads back to work next week.

PCE came in as expected, but inflation is still elevated

Jerome Powell has a tricky path ahead with inflation rising.

PCE complicates a Fed rate cut

Mark Reeth

Americans who love to shop online for a bit of retail therapy are about to have a bad time.

Way back in the 1930s, lawmakers created the de minimis exemption, allowing small packages to enter the US duty-free in order to "avoid the expense and inconvenience" of regulating them. The growth of e-commerce prompted regulators to raise the minimum value of packages exempt from tariffs to $800, ushering in a boom for online retail. Today, 

 entering the US fall under this exemption, or roughly 4 million shipments 

But back in May, President Trump closed this loophole for packages shipped from China—and today, it has ended for packages shipped from everywhere else, forcing companies to either pay a flat fee or pay the tariff rate for the package’s country of origin.

Small business and direct-to-consumer brands have been scrambling to adjust to the new reality, and will likely be forced to 

 to absorb higher costs. That means tariff inflation is finally on the way, and economists warn these higher prices could make for a very expensive 

As for stocks, analysts anticipate the new regulations will be a serious blow to UPS, FedEx, and DHL, which shipped a good chunk of the 1.36 billion de minimis packages sent to the US in 2024. Retailers like Tapestry and Lululemon will be 

 of shipping goods, while Etsy, eBay, and Thredup could gain ground as online shoppers search for second-hand and domestic alternatives. But the biggest winner of them all is Amazon, which should benefit from its economies of scale and grow into an even greater force in the e-commerce world.

De minimis exemption: Stock market winners, losers

The end of the exemption leaves some online retailers struggling, while others will gain ground.

Closing the loophole

On the surface, it looks like the US economy is defying slowdown fears.

 numbers indicated that inflation-adjusted gross domestic product—aka all the goods and services produced in the US—jumped 3.3%, beating the original estimate of 3%.

But some argue that under the hood, those numbers aren’t quite as great as they seem.

“While the US economy grew at an upwardly revised annualized rate of 3.3% in Q2 2025, the strength was largely a mirage, reflecting a sharp decline in imports after businesses accelerated purchases in response to tariffs in Q1,” explained EY-Parthenon Chief Economist Gregory Daco. “The US economy only expanded at a muted 1.4% average pace in H1, revealing soft underlying private sector demand outside of the AI-driven investment boom.”

With growth largely expected to plateau in Q3 thanks to the effects of tariffs, the latest numbers could add to the mounting pile of evidence pointing the Federal Reserve towards a rate cut, a move the central bank is widely anticipated to make in September.

“The upward revisions to second quarter economic growth raises the bar for the third quarter. Slowing job growth indicates the economy will not keep up with the above-trend growth from the previous quarter,” explained Chief Economist for LPL Financial Jeffrey Roach. “Softer growth in Q3 will add fuel to those calling for rate cuts,” he added.

Like NFTs, fartcoin, and President Trump digital trading cards, we’ve got one more crypto project hoisted upon us that literally nobody asked for.

 this quarter, giving the crypto industry just one more stamp of legitimacy. The data was published this morning on Bitcoin, Ethereum, Solana, and six other blockchains.

“It’s only fitting that the Commerce Department and President Donald Trump, the Crypto-President, publicly release economic statistical data on the blockchain,” said U.S. Secretary of Commerce Howard Lutnick in a statement.

To that one person out there who actually uses blockchains for news gathering: Congrats, today is your lucky day.—

GDP revision: Increase in business and consumer spending

The US government is putting GDP data on the blockchain, whatever that means.

GDP + blockchain = ?

This year’s US Open features a unique culinary experience: $100 chicken nuggets from the famed Coqodaq, complete with 

 that high-income consumers are doing just fine, even as the rest of America tightens its purse strings.

Data from Moody’s earlier this month revealed that the top 20% of earners are responsible for 

 across the US, while spending among middle class and low-income Americans has slowed. That matters because consumer spending accounts for two-thirds of GDP, so as long as those high-income Americans keep shelling out for fast food and fish eggs, the economy should be OK.

 since the pandemic back in Q1, it has broadly improved in the months since (more on that below). But the fact that it’s mainly top-earning Americans who are keeping their wallets open indicates that the recovery is uneven.

In other words: the folks mixing chicken nuggets and caviar are keeping the economy going, even as some people choose to eat a kid’s meal to save a buck. Maybe after the US Open those big spenders should visit Lincoln Financial Field over in Philadelphia, where the Eagles are now charging an exorbitant $18.50 for 

Chicken nuggets and caviar: Economic indicators

The US Open's vaunted fare is fine for high-income Americans.

Can you mix honey mustard and caviar?

Yesterday evening, President Trump became the first sitting US president to attempt to fire a Federal Reserve governor. He was also the first to do so via social media.

, the president cited allegations that Fed Governor Lisa Cook committed mortgage fraud as “sufficient reason” to oust Cook. But, like Leonardo DiCaprio in 

, Cook made it clear that she ain’t leaving.

“I will not resign,” Cook said in a statement, noting that the president had “no authority” to fire her. Her lawyer announced this afternoon that Cook will 

 contending her dismissal. Whether or not allegations of fraud are enough cause is an open question that will likely need to be answered by the Supreme Court, in what is widely expected to be a protracted legal battle.

That leaves Cook, whose term as a Fed governor doesn’t end until 2038, in limbo. It also gives Trump a further foothold in the Fed, where he’s already set to replace retiring Governor Adriana Kugler. If he can successfully give Cook the boot, that would allow him to nominate his fourth appointee in the Fed—

 on the Fed’s seven-member board, a big step in reshaping the central bank in his image.

Trump’s attempted firing is just the latest salvo in his campaign against the Fed, and while the stock market has responded harshly at the idea of dismissing Chair Jerome Powell in the past, it took today’s news in stride—giving the president no reason to back down, and every reason to keep pushing the Fed to the brink.

Trump reshapes Fed in his image

The president has apparently fired Fed governor Lisa Cook, who is suing.

Fed up

If you want a straightforward, to-the-point, affirmative statement—don’t ask Fed Chair Jerome Powell.

As per usual, the bespectacled economist used his signature indirect language to set the stage for the central bank’s next move during his annual address in Jackson Hole, Wyoming—but investors still managed to read 

What Powell said: “With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” What the market heard: Rate cuts are coming.

While he reiterated that tariffs could still pose a risk to stoking inflation, Powell added that the labor market remains strong—all conditions that enable the Fed to “proceed carefully.” He noted that a “reasonable base case” could be that the price increase from tariffs would actually be “short-lived”—or dare we say, 

That was interpreted as great news for the market, given a lower risk of inflation justifies lowering borrowing costs.

Since December 2024, the Fed has kept borrowing rates steady at a range of 4.25% to 4.5%. Traders are pricing in a 83% chance the Fed cuts rates in September, up from 75% yesterday.

Stocks soared in response to the speech, while Treasury yields went into freefall.

“It’s no surprise that markets reacted with glee and both stock and bond investors will be happy if prices close this afternoon at the levels they are now trading,” explained Chief Investment Officer for Northlight Asset Management Chris Zaccarelli. “To use the old Fed-analogy, the party isn’t over yet and Jay isn’t ready to take away the (spiked) punch bowl.”

Zooming out, this particular address from Powell is a consequential one. It will likely be his last, given President Trump’s not-so-subtle attacks on the Fed’s independence and Powell himself.

Though he didn't mention the president by name, Powell did affirm the importance of the separation between the Fed and politics: “FOMC members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks,” explained Powell. “We will never deviate from that approach.”

He could have dropped the mic right there.—

Jerome Powell said there may be rate cuts coming

The Fed Chair's speech in Jackson Hole was light on details, but investors read between the lines.

We're (probably) getting a rate cut

Judy Dutton

The old adage “actions speak louder than words” applies to how America’s shopping these days: Consumer data shows that although we feel nervous cracking open our wallets, we’re doing it anyway and wallowing in retail therapy.

 in July, according to the Commerce Department, which also revised its June sales number upward to 0.9%. That news comes on the very day that the University of Michigan found consumer sentiment 

 from July to August, the first drop in four months, and an unexpected one at that.

These seemingly contradictory findings actually make sense from a human behavior standpoint: Feelings come first, and lead to action later on.

“Sales data captures present realities, and sentiment tends to reflect future intent,” Savage Growth Partners CEO Jensen Savage told Brew Markets. “Big-ticket or event-driven purchases can spike spending even if people feel anxious overall.”

Americans have good reason to feel jittery: The US job market is seriously 

 as tariffs and inflation loom. UMichigan found that Americans expect prices to rise by 4.9% in the year ahead, up from July’s 4.5%.

“Consumers are anticipating rising costs,” said Savage. “So it would make sense to see consumers front-loading purchases with a ‘buy now before prices increase’ mentality.”

Consumer spending surged in nine out of the 13 categories tracked by the Commerce Department, and the biggest winner at the register was the grandest splurge of all: cars. Auto dealers enjoyed a 

 in sales, while furniture came in a close second at 1.4%. Online sales also got a good 0.8% bump, boosted by mega-sales such as Amazon’s extended Prime Day, Walmart’s “Deals” week, and Target’s back-to-school promos.

The biggest losers? Home improvement posted a 1% loss, followed by electronics (-0.6%) and restaurants and bars (-0.4%). Because let’s face it, when wallets feel slim and moods are grim, no one wants to nab the latest iPhone when the one you have works fine, or blow $20 on 

 for lunch, or grab a craft beer when many of your bar buddies are 

“Americans are skipping the $17 martini salad and redeploying to big-ticket bargains and online deals,” explained chief investment officer at Running Point Capital Advisors Michael Ashley Schulman, adding that some may have pulled forward car buys ahead of tariff noise and expiring EV credits. “Surveys say ‘I’m worried’; swipes say ‘but that washer’s 20% off.’”