New economic data will help Fed officials make an interest rate decision

Members of the Federal Open Market Committee will hold their fourth meeting of the year this week — that’s the body that sets interest rates for the Federal Reserve.

Chairman Jerome Powell and his colleagues will, like so many of us, try to figure out what exactly is going on in this economy. And they’ll have a little help from some economic data coming out Tuesday: May retail sales, May industrial production and April business inventories (how much stuff companies had on hand during a really volatile month).

These kinds of data releases are puzzle pieces that can help answer larger questions about the economy, said Ann Owen, an economist at Hamilton College.

“And right now, I think the big puzzle is, ‘Why was inflation in May so low?’” she said.

We’ve been hearing for months now that tariffs would drive up prices. But inflation barely budged in May. Data this week could help tell us why. Owen has some theories.

“One is consumer demand is low, and the other would be that firms had stockpiled some of their inventories in order to kind of get ahead of the tariffs,” she said.

April’s inventory numbers will show what businesses were doing as President Donald Trump imposed, then paused, his so-called “liberation day” tariffs.

Meanwhile, retail sales will give us some insight into consumer demand in May, after consumers did a lot of shopping in March and April to try to get ahead of tariffs. 

“People pulled their purchases forward. Myself guilty. You know, purchased a couple of kids shoes and stuff like that, ahead of what we thought tariffs would look like,” said Yelena Shulyatyeva, a senior U.S. economist at The Conference Board.

Now, she said, consumers may be pulling back.

Amid all that, tariffs are supposed to encourage companies to make more things in the U.S., which industrial production helps measure. 

For example, Emily Blanchard, an economist at Dartmouth’s Tuck School of Business, said companies might buy more domestic steel and aluminum now, which would increase production. 

“But they’re pairing those metals purchases with a bunch of other products that also became more expensive because of other tariffs,” she said.

All these moving parts, Blanchard said, make it really hard to get a full picture of where this economy is going.