3 Things You Need to Know This Week | US Inflation, China GDP, US Retail Sales

Transcript

Paige Tyson:

Hello and welcome to 3 Things You Need to Know This Week— our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. And with that, here are three things you need to know this week.

First, US inflation.

The latest US inflation data will be released on Tuesday, offering more insight into the current state of the economy. Most recently, data for the Consumer Price Index, or CPI, showed headline inflation accelerated from 3.8% in April to 4.2% in May, with core inflation—which excludes volatile food and energy prices— at a more reasonable 2.9%. Expectations are for June's figures to show inflation decelerated somewhat. Now, headline inflation back above 4% may sound alarming to some, but May's CPI data closely matched expectations, which tells us the markets weren't negatively surprised. And we know that rising everyday expenses cause real stress for many families, especially when some of the most visible items in the household budget suddenly get more expensive. But to us, regardless of which measure investors focus on, a larger or longer spike in inflation still seems unlikely. Moderate money-supply growth, along with the historically short-lived effect that regional conflicts like the war in Iran tend to have on energy prices, suggest inflation may moderate sooner than most expect. That leaves room for positive surprise. While headlines warn that inflation is likely to expand to the broader economy, we're skeptical. That generally doesn't happen without some combination of major fiscal stimulus, supply chain disruptions, or meaningful acceleration in money-supply growth.

Next, China's GDP.

On Wednesday, China will release its GDP report for the second quarter of 2026. In Q1 2026, China recorded year-over-year GDP growth of approximately 5%, bucking a years-long trend of declining figures. While China's economy has moderated over the past several years, the path hasn't been linear. In our view, this signals an economy that's maturing, rather than one that's declining. As economies develop and expand, sustaining their rapid early-stage growth rates become increasingly difficult. China's slower long-term growth rate is a natural part of its evolution. Additionally, much of the financial media continues to focus on China's property downturn and sluggish consumption, reinforcing a negative narrative around the economy. As we've mentioned in MarketMinder, these concerns have persisted for years, while China's economy has continued expanding and frequently exceeded low expectations. Importantly, regardless of if Wednesday's GDP report exceeds expectations or falls short, what matters most is that China, despite facing economic headwinds, is still expected to contribute positively to global economic growth. This resilience should benefit stocks and reward investors following a diversified long-term strategy.

Finally, US Retail Sales.

Thursday, we'll get June's US retail sales report. May retail sales increased 0.9% from the prior month, up from April's revised 0.4% increase. Expectations are for June data to come in somewhere between April and May's readings. Regardless of how the data looks, some investors may be concerned that low consumer sentiment and rising inflation may cause consumers to spend less, potentially leading to a recession. But consumer spending isn't the big economic driver many think it is, and we'd encourage investors not to worry. Monthly fluctuations in retail sales aren't unusual and have cropped up several times over recent years without sparking a recession. Plus, one month of data doesn't tell the whole story, especially when it comes to recent market volatility. Most consumer spending goes to everyday necessities like food, housing, utilities, and healthcare. These categories typically remain steady, even when the economy wobbles. Here's our take: The often-downbeat tone and economic news coverage today suggest that consumer spending likely has a low bar to clear to deliver positive surprise ahead. We see that as a positive for investors.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.com. Thanks for tuning in, and don't forget to hit like and subscribe.