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Towards the Fed decision, it’s time to look at the situation in the US. The picture isn’t that bright.  The traditional locomotive of the global economy is not a locomotive of growth.

For a third year in a row, the beginning of the year was optimistic, with nice job growth and encouraging indicators.

  • Jobs: The job report for May was a huge disappointment, with a gain of only 69K jobs and downwards revisions. In the past, revisions were mostly to the upside. June could be even worse, and a downwards revision of May’s numbers will not leave too many gains.
  • Manufacturing is slower: the ISM and Markit PMIs still show growth, but slower than beforehand. The Chicago and Philly indices were already much worse.
  • Housing: The housing sector did show some encouraging signs of late, and it seems that the sector has reached the bottom. Yet there are no real signs that it is climbing above the bottom. Prices aren’t rising and the number of deals is stagnant.
  • Other indicators are weak as well: Durable goods orders, retail sales and consumer confidence don’t look good.
  • Drop in oil prices: This is a bright spot for the US consumer, but it isn’t fully felt yet. Lower gasoline prices leave more money in the pockets of Americans. However, with the gloomy mood, the tendency to spend will likely be limited.

Q1 growth was revised to the downside: a pace of only 1.9%. This is too weak. In Q2, the pace will likely be closer to stall speed.

This article is part of the Forex Monthly Outlook. You can download it by joining the newsletter in the form below, which appears on any article on  Forex Crunch.