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Economic Commentary

Weekly Economic Commentary

May 4, 2026 by Jeanette Garretty, Chief Economist

GDP growth and consumer inflation figures released last week for both the Euro Area and the United States effectively told a tale of two different economies — both at war but experiencing the conflict in dissimilar fashion. US economic growth seems quite solid (Jerome Powell’s words were “amazingly resilient”), with inflation once again a worrisome problem. European economic growth is barely moving the needle, though inflation is deceptively better controlled due to government energy price subsidies and temporary tax cuts. Policy differences are emerging as well; the European Central Bank (ECB) is possibly thinking that the Abominable Snowman of Stagflation lives in the Black Forest, and the ECB may move to slay the mythical beast with interest rate hikes in the near future. Needless to say, a Federal Reserve interest rate hike would be a poke in the eye of a fearsome dragon and is unlikely to happen anytime soon (never fear, reducing the Federal Reserve balance sheet could tighten monetary policy without provoking the beast.) A lack of coordination between central banks is not ideal and may serve to raise volatility in global bond and foreign exchange markets. Nevertheless, as geo-political tensions proliferate and the blockage of the Strait of Hormuz continues, countries will be forced to address very specific and politically unique economic stresses. Variety can be the spice of life, yet it can also introduce unexpected chaos.   

Data to Watch 

  • US Consumer Credit Change for March, released Thursday, May 7 
  • US Unit Labor Costs, preliminary first quarter 2026, released Thursday, May 7 
  • US Nonfarm Payrolls and Unemployment Rate for April, released Friday, May 8 

Suggested Readings 

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