EM LATAM CREDIT: ARGENTINA: Milei Hosts Mercosur Summit, Lula Visits Kirchner
(from our Macro Analyst)
• President Milei will host the annual Mercosur summit in Buenos Aires today, which will be attended by various member heads of state. La Nacion reports that the focus will reportedly be on efforts to expand the list of tariff exceptions, as Argentina pushes for a trade agreement with the US, before Brazil takes over the presidency of the bloc for the next six months. Lula is expected to place more focus on environmental and human rights issues during his presidency.
• Against this backdrop, much attention has also been placed on President Lula’s planned visit to former President Cristina Kirchner at her home where she is under house arrest. Yesterday, an Argentinian court authorised his visit provided it maintains strict compliance with the rules of conduct, aimed at not disturbing the peace, according to AFP. The planned visit, which will follow the summit, is said to have created tensions in the Argentinian government, but Milei is keen to ensure it doesn’t disrupt proceedings.
• On the data front, vehicle sales and production figures for June are due today, ahead of the latest BCRA analyst survey tomorrow. Stronger-than-expected economic activity data this week (+7.7% y/y in April) increase the prospect of a further increase in GDP growth forecasts tomorrow, which currently sit at 5.2% for this year.
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EUROPEAN INFLATION: Avg March-May SA Services Inflation Softer Than '23 and '24
Eurozone core inflation prices fell 0.12% M/M in May according to the ECB’s seasonally adjusted data, after rising 0.45% in April. Unsurprisingly, services drove the pullback, with prices falling 0.17% M/M after a 0.70% increase in April. Core goods inflation was 0.06% M/M (vs -0.02% prior).
- As implied by the country-level NSA data over the past week, the services softness was largely a function of unwinding Easter effects. However, the extent of the SA and NSA deceleration from April’s levels could suggest more broad-based disinflation in non-travel-related categories. We’ll have to wait for the final release on June 18 to see whether that was the case.
- Attempting to correct for Easter effects, average monthly seasonally adjusted services inflation between March-May was 0.27% in 2025. That’s below the 0.41% seen in 2024 and 0.37% in 2023, providing further evidence that underlying disinflation is progressing.
- 3m/3m core inflation momentum eased to 2.70%, after 2.87% in April and 2.37% in March. Services momentum fell to 3.95% from 4.10% prior.
- Referencing the NSA data, JP Morgan write: “That core inflation in May (2.3%oya) undershot the March level (2.4%oya) may be linked to an additional distortion. The late Easter also comes with a late Pentecost this year, which also impacts short holidays in some countries (skewed towards June rather than May). This effect is smaller than the Easter effect but can be significant”.
STIR: SOFR Call Spread Buyers, Vol Sales
- +20,000 SFRN5 96.75/96.87 call spds, cab
- +10,000 0QM5 96.87/97.12 call spds, 1.5 ref 96.58
- -5,000 0QZ5 96.75 straddles, 68.5-68.0
US DATA: Redbook, CARTS Point To Solid May Retail Sales Growth
The latest Redbook Retail Sales Index showed 4.9% Y/Y growth in the last week of May (to May 31), a slowdown from 6.1% the prior week but still keeping total monthly sales at 5.5% Y/Y (vs retailers' 5.4% targeted gain). This is the first Redbook report in a while to refer to tariffs, and it earns a mention on the inflationary side: "Due to tariffs, some retailers have selectively increased prices on their products. A few retailers have lowered their profit outlooks and withdrawn their full-year guidance."
- Redbook also notes looking forward that "seasonal demand is expected to drive business through June", with a preliminary growth target of 5.2%, though "it is likely to moderate in July, which is a transitional month leading up to the fall restocking and back-to-school periods".
- Separately, the Chicago Fed's CARTS estimate of retail sales ex-autos growth in May is 0.4% M/M SA (vs 0.10% in the "official" series for April).
- While both of these series are in nominal terms (which is no different from the official Census Bureau series), there is no evidence in the data to suggest a slowdown in national retail sales in May. Indeed the CARTS report points to a 0.4% inflation-adjusted rise in retail sales ex-autos.
- There aren't yet estimates for the May Census Bureau release which is out on June 17.
