Summary
United States: Growth Still Solid, but Slowdown on the Horizon
- The ISM services index shot higher into expansion territory during January, which is the latest piece of evidence that economic growth is still firmly in positive territory. A sharp rise in the prices paid subindex, however, shows that inflation pressures have yet to be fully extinguished. Meanwhile, higher interest rates continue to weigh on consumer borrowing. Total consumer credit rose by $1.6 billion in December, a smaller-than-expected gain.
- Next week: CPI (Tuesday), Retail Sales (Thursday), Industrial Production (Thursday)
International: Central Banks Still in the Spotlight
- This week, the Reserve Bank of Australia held its policy rate steady at 4.35% and offered policy guidance that was more hawkish than expected. In Japan, the underlying details of the December wage data, as well as encouraging signs surrounding the ongoing spring wage negotiations, keep the central bank on course for an April rate hike, in our view. Mexico’s central bank held rates steady, but less hawkish language in its statement suggests it could cut rates in March.
- Next week: U.K. CPI (Wednesday), Japan GDP (Thursday), Australia Employment (Thursday)
Credit Market Insights: Credit Conditions Are Coming into Balance
- The Senior Loan Officer Opinion Survey (SLOOS) for Q4-2023 saw a moderation in tight credit conditions. Most banks reported tightening lending standards for business commercial and investment (C&I), consumer and commercial real estate (CRE) loans, but the proportion tightening was significantly lower from the elevated levels seen throughout 2023.
Topic of the Week: Oh, Mexico It Sounds So Simple I Just Got to Go
- The U.S. international trade deficit has been volatile in the wake of the pandemic. After widening for three straight years, the trade deficit shrank by $178 billion last year, which more than reversed the 2022 widening. The headline that many glommed onto this week was that Mexico displaced China as the top import partner for the United States.
