Weekly economic commentary: Sentiment is cratering

Summary

United States: Sentiment is cratering but hard data signal only a stalling

• The 90-day pause with China cheered financial markets, but economic data showed early indications of the economic impact of tariffs. Retail sales held up OK and industrial production was flat, but small business confidence optimism faded. Consumer sentiment plunged to the second lowest on record amid inflation worries.

• Next week: Existing Home Sales (Thu.), New Home Sales (Fri.)

International: Foreign economies start 2025 on surprisingly solid note

• This week brought a wave of economic data from both advanced and emerging economies, with several upside surprises on the growth front. The United Kingdom, Norway and Switzerland all posted stronger-than-expected first quarter growth figures, reflecting pockets of resilience despite broader global uncertainty. Japan was the notable outlier, with GDP contracting more than expected. On the emerging economy side, India’s softer-than-expected inflation print was reassuring. Meanwhile, Mexico's central bank lowered its policy rate by 50 bps to 8.50% and signaled further easing to come.

• Next week: China Industrial Production and Retail Sales (Mon.), Reserve Bank of Australia Policy Rate (Tue.), Eurozone PMIs (Thu.)

Credit market insights: Here to collect: Student loan delinquencies surge in Q1

• The Federal Reserve Bank of New York released an update to its Quarterly Report on Household Debt and Credit this week, which included data through Q1-2025. Rising delinquencies point to some modest strain among consumers, and the resumption of student loan payments after almost five years of forbearance comes as the consumer is on somewhat shakier footing.

Topic of the week: Commercial real estate on stable ground before Liberation Day

• The CRE market started 2025 on a positive note. During Q1-2025, transaction volumes, property prices and lending activity all improved against a backdrop of slightly lower capital costs. On balance, vacancy rates across the major property types were lower or ticked only modestly higher, suggesting that the CRE market is on the way to finding balance after several challenging years.

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