North America

The U.S. economy shrank in the first quarter, restrained by weaker consumer spending and an even bigger impact from trade than was initially reported. The economy’s primary growth engine—consumer spending—advanced 1.2 percent, down from an initial estimate of 1.8 percent and the weakest pace in almost two years. Meanwhile, net exports subtracted nearly 5 percentage points from the GDP calculation, slightly more than the first projection and the largest such impact on record.

A strong jump in tariff-driven exports fueled Canada’s growth at the start of this year, offsetting domestic weakness in other parts of the economy. Preliminary data also suggests some continued momentum at the start of the second quarter, with output rising 0.1 percent in April, led by the mining, oil and gas, and finance industries.

In the U.S., consumer sentiment rebounded in late May from one of the lowest readings on record earlier in the month, and long-term inflation expectations retreated as concerns about the economy eased after the rollback of China tariffs.

In the wake of Nvidia Corp.’s latest earnings report and upbeat sales forecast, the U.S. government’s GDP report also underscored the locomotive power of the artificial intelligence (AI) boom. Business investment in computers and other information processing equipment contributed a record 1.01 percentage points to first-quarter GDP.

Europe

European firms in China are the most pessimistic about growth prospects that they have been since 2011, underscoring the challenges of doing business in the world’s second-largest economy despite recent government efforts to address complaints. Some 29 percent of respondents were downbeat on the outlook for their sector over the next two years, according to an annual report by the European Union Chamber of Commerce in China.

Germany’s inflation rate dropped to 2.1 percent in May, slowing less than expected and highlighting lingering risks as the European Central Bank prepares to cut rates again. The data follows reports from Italy and Spain, where inflation eased to just below 2 percent, supporting the case for borrowing costs to be lowered further. Meanwhile, in France consumer prices rose just 0.6 percent from the previous year.

Europe is gradually adding gas to its depleted storage sites despite seasonal works at production facilities across the globe. In addition, overall demand for liquefied natural gas (LNG) in Asia remains weak, which is a relief for European buyers that compete for the same fuel.

Asia

For decades, Asia’s export powerhouses had a simple financial strategy: Sell goods to the United States, then invest the proceeds in American assets. That model is now facing its biggest threat since the 2008 global financial crisis as Donald Trump tries to remake global trade and the U.S. economy—up-ending the logic behind $7.5 trillion of investments from Asia. Some of the world’s biggest money managers say an unwind is just getting started.

India’s economy grew at a faster pace than analysts expected, driven by a pick-up in agricultural activity and investments. While India retains its title as the world’s fastest-growing major economy, the annual growth rate marks a notable slowdown from the 8 percent average seen in recent years—the pace needed by Prime Minister Narendra Modi to achieve his ambitious goal of making the country a developed nation by 2047.

Emerging Markets

Brazil’s consumer prices rose less than forecast in early May, fueling bets that the central bank will halt its cycle of interest rate hikes while keeping its monetary policy restrictive going forward to tame inflation.

World Economy

Japan lost its position as the world’s largest creditor nation for the first time in 34 years, giving up the title to Germany despite posting a record amount of overseas assets. Japan’s status as the world’s biggest net-creditor nation was a consequence of decades of current account surpluses that saw Japanese investors and companies load up on holdings abroad.

New Zealand lowered its interest rates for sixth straight meeting. South Africa, the Bank of Korea, Mozambique, and Eswatini also cut rates. Meanwhile, Hungary, Israel, Uruguay, Guatemala, and Tunisia kept borrowing costs unchanged.

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