US Dollar: Consumer resilience and GDP under scrutiny – UBS

UBS’s Chief Economist Paul Donovan focuses on United States (US) consumers ahead of May income and spending data, stressing their persistent willingness to spend despite tariff and Oil price shocks. He notes that households have reduced savings as real income growth turned negative and sees no clear reason for this pattern to have changed. Revised first-quarter US Gross Domestic Product (GDP) is expected to draw limited market interest.

Spending holds up despite income squeeze

"Crude oil futures reached pre-war levels, anticipating future oil flows through the Strait of Hormuz. Current oil flows are only a fraction of pre-war levels, and oil refineries refine actual oil, not hypothetical future oil. "

"Consumer (refined) gasoline prices in the US remain around a third higher than pre-war prices (in the UK, petrol prices are around 10% higher, reflecting different tax structures). Prices should fall over time, but the potential political cost has provoked the ire of US President Trump."

"US consumers are in focus with May income and spending data. The US consumer has shown an impressive determination to keep shopping throughout the tariff and oil price shocks, cutting savings as real income growth turned negative. There is no reason to suppose this has not continued."

"Revised first-quarter US GDP is unlikely to get too much market attention. The investment in AI means US durable goods orders may be slightly more interesting, but AI equipment is not really a “Made in the USA” story."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)