Weekly economic commentary: It felt like much longer than a week

Summary

United States: It felt like much longer than a week

• It was a week of contradiction, where just when things looked like they were going badly, some mitigating factor offset a prior concern. By Friday, it felt more like survival than victory. The takeaways include an improving backdrop for manufacturing and construction, a little less heat in the service sector and a jobs market that refuses to fit into a tidy label.

• Next week: CPI (Wed.), Retail Sales (Fri.), Industrial Production (Fri.)

International: Foreign central banks lower rates

• This week saw rate reductions from central banks across emerging and advanced economies. In Mexico, Banxico lowered its policy rate by 50 bps to 9.50% and issued commentary that we view as consistent with another same-sized move in March. Elsewhere, the Reserve Bank of India delivered its first rate cut since 2020, lowering its policy rate by 25 bps, and the Bank of England also cut its policy rate by 25 bps.

• Next week: Norway CPI (Mon.), Brazil Inflation (Tue.), U.K. GDP (Thu.)

Credit market insights: The wave of credit tightening is quickly receding

• Banks appear to be changing their risk calculus. The Q4 Senior Loan Officer Opinion Survey revealed that banks are still tightening lending standards on net, but the prevalence of restriction is quickly fading.

Topic of the week: The tariff man cometh

• The week started off with a bang when the Trump administration announced plans on Saturday to place tariffs of 25% on goods imports from Canada and Mexico and a tariff of 10% on goods imports from China, effective Feb. 4. Though the Canada and Mexico tariffs were postponed for 30 days, the domestic upshot of the policies, if they are eventually realized, is higher inflation in the near term and slower growth in the outlook.

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