The macro backdrop remains in expansion (Macro Score 93/100) with zero crisis flags triggered and employment, credit, and liquidity all green. The focus is on U.S. inflation, which is accelerating sharply (CPI 4.3%, PCE 4.1%) while the Fed holds rates and the ECB hikes. Housing and consumer confidence are the weak spots, but there are no signs of an imminent recession.

Macro headline of the week

The macro backdrop remains in expansion: the Macro Score reads 93/100, with 8 of 9 categories green and only inflation in amber. Classic recession indicators are switched off, but U.S. CPI and PCE are accelerating sharply and are this week's focal point.

Crisis dashboard

0 of 8 flags triggered. All classic recession indicators are switched off:

  • Sahm Rule: 0.07 pp (threshold 0.50).
  • 10y–3m curve: +71 bp, no inversion.
  • Weekly unemployment claims: −7% year-over-year (threshold +15%).
  • Mortgage delinquency: +0.12 pp over 1 year (threshold +0.30).
  • Corporate credit: +8.0% year-over-year, no contraction.
  • Financial conditions (NFCI): −0.52 (threshold 0).
  • Housing: permits −0.4% y/y (threshold −10%).
  • High-yield credit: 270 bp, z=−1.2, no stress.

Inflation

U.S. inflation is overheating. CPI rose to 4.3% year-over-year, accelerating +1.6 pp over three months (up from 2.7%). PCE rose to 4.1% year-over-year, accelerating +1.2 pp over three months (from 2.9%). In the eurozone, HICP advanced to 2.8% year-over-year, with a more contained acceleration of +0.2 pp over three months. The divergence is clear: the U.S. is accelerating forcefully, while Europe is moving only marginally.

Employment

The U.S. labor market remains solid. The unemployment rate stands at 4.2%, down −0.1 pp over three months, and payrolls added +57,000 in the month. The Sahm Rule shows a gap of 0.07 pp, far from the 0.50 threshold, with a three-month average unemployment rate of 4.3%. Weekly claims average 219,000 (four-week average), −7% versus a year ago. There are no signs of labor market deterioration.

Credit and delinquencies

Delinquency trends are mixed but contained. Mortgage delinquency stands at 1.89%, up +0.12 pp over one year; credit card delinquency fell to 2.92% (−0.14 pp); and corporate delinquency rose slightly to 1.34% (+0.05 pp). Corporate credit grows a solid +8.0% year-over-year and consumer credit +2.1% year-over-year. Financial conditions (NFCI) stand at −0.52, i.e., loose and below their historical average. Credit is flowing without restrictions.

Real economy

Activity holds up with some nuances. Industrial production grows +1.7% year-over-year and retail sales a notable +6.9% year-over-year. Housing, which typically leads the cycle, shows weakness: permits fall −0.4% y/y and housing starts −8.7% y/y. Consumer confidence is the weak spot: 44.8, down −7.4 over one year and in recessionary territory (below 70). Leading manufacturing surveys are positive: Empire State +5.7 (with a +5.9 improvement over three months) and Philly Fed +10.3, both in expansion.

Rates

The Fed holds the federal funds rate at 3.62%, unchanged over the last month (−0.02 pp over three months). The ECB raised its deposit rate +25 bp over the last month, to 2.25%. This is a divergent move: while the Fed pauses, the ECB tightens.

Liquidity

The system is gaining liquidity. U.S. net liquidity stands at $5,958 B, up +1.0% over four weeks and +0.2% over thirteen weeks. The Fed's balance sheet stands at $6,736 B and is expanding (+0.6% over thirteen weeks, +1.1% year-over-year), pointing to the end of QT. The Reverse Repo facility is nearly depleted at $0.5 B, leaving no additional cushion. The Treasury General Account (TGA) fell to $774 B (−$54 B over four weeks), injecting liquidity into the system. M2 grows +5.6% year-over-year ($23,052 B). By contrast, external balance sheets are contracting: ECB −2.6% year-over-year and BoJ −10.9% year-over-year. Overall, the U.S. is adding liquidity —a supportive factor for risk assets— while Europe and Japan are draining it.

Sector rotation

Risk appetite is broad-based. The sector rotation signal (French data through 2026-05-29, with a several-week lag) shows defensives lagging the market by −14.4 pp over three months and −4.7 pp over the last month, a signal of rotation into risk. The Dow/Nasdaq proxy, more up to date (through 2026-07-10), shows −5.1 pp over three months but +1.1 pp over the last month, a nuance of recent stabilization. Overall, defensives are not leading, consistent with a market that has an appetite for risk.

Bottom line

The overall dataset points to expansion, with a Macro Score of 93/100 and zero crisis flags triggered. Employment, credit, activity, liquidity, and equities are all green. The point to watch is U.S. inflation, which is accelerating sharply (CPI 4.3%, PCE 4.1%) and contrasts with a Fed on pause and an ECB that is tightening. Mixed signals appear in housing (housing starts −8.7% y/y, though permits are barely slipping) and in consumer confidence (44.8, in recessionary territory), which clash with robust retail sales and expanding manufacturing surveys. In short: an expansionary cycle with rising inflationary pressure as the main imbalance, with no signs of imminent recession in the indicators presented.