Weekly economic commentary: Perhaps the key to economic happiness is low expectations

Summary

United States: Perhaps the key to economic happiness is low expectations

• A better-than-expected jobs report owes much to big gains in just a few categories, while the trend ascent in continuing jobless claims still points to slowing momentum in the labor market. Meanwhile, tariff impact continues to weigh on trade activity and is top of mind for purchasing managers.

• Next week: NFIB (Tue.), Initial Jobless Claims (Thu.)

International: From Asia to Europe: Business sentiment, inflation trends and policy shifts

• This week’s business sentiment surveys showed modest improvement in China PMIs, while Japan’s Tankan survey beat expectations, supporting the case for a Bank of Japan rate hike later this year. On the price front, Eurozone inflation was in line with consensus expectations, while Switzerland’s CPI surprised to the upside. Meanwhile, Poland’s central bank unexpectedly cut rates, citing easing inflation and softening growth momentum.

• Next week: Reserve Bank of Australia Policy Rate (Tue.), Mexico CPI (Wed.), Norway CPI (Thu.)

Credit market insights: Bank lending remains tight amid softer demand

• The first quarter SLOOS revealed banks tightened lending standards across most business categories, while demand for credit generally weakened. While lending standards remain tight, particularly for commercial sectors, the decline in demand suggests that both businesses and consumers may be wary of economic uncertainty and high interest rates.

Topic of the week: The One Big Beautiful Bill endgame

• Republicans in Congress are on track to advance the Senate-version reconciliation bill to the president's desk for signature ahead of a self-imposed July 4 deadline. While the Senate bill made a variety of modifications to the version that passed the House of Representatives in late May, from a macro perspective, the key implications have not changed materially: bigger budget deficits and faster economic growth over the next couple of years partially offset by higher tariffs, and a somewhat more ambiguous longer-term impact.

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