Members of the Federal Open Markets Committee (FOMC) have attributed a significant portion of their speaking engagements to emphasizing the importance of using hard data versus soft data in their perceptions on the current state of the economy. Last week’s University of Michigan consumer sentiment survey was completed before Liberation Day, as was the New York Fed’s survey of one-year inflation expectations, showing that consumers expect inflation to be around 3.6% by next year. Most respondents anticipated higher unemployment and a lower stock market one year from now. This data led to a lot more “wait and see” language from Fed speakers this week. 

With a few weeks until the first estimates of first quarter GDP are released, economists are holding steady in their forecasts for a sharp slowdown in economic activity this year. Morgan Stanley, BNP Paribas, RBC Capital Markets, Barclays Plc and UBS issued updated GDP projections this week expecting GDP growth to range between –0.1% and 0.6% in 2025, and 0.5% to 1.5% next year. 

This week and for the seventh time since June, the European Central Bank (ECB) lowered its benchmark interest rate in anticipation of economic turmoil from the new U.S. tariff policy. At the same time, President Trump expressed optimism on potentially reaching a trade deal with the E.U. 

KEY INDICATORS THIS WEEK

Retail Sales – Retail sales data surprised traders with a resilient 1.4% increase for March, its highest level in over two years. The bump was largely attributed to consumers rushing to make major purchases before tariffs take effect. Within that metric, auto purchases showed the largest increase at 5.3%, while Chinese-imported products like sporting goods and electronics advanced ahead of Liberation Day too. Economists are anticipating significant increases to input costs once the full tariffs take effect, especially for imported goods.

FICO Scores – Credit scores are beginning to reflect student loan delinquencies for the first time in years after they were reinstated in October 2023 with a 12-month moratorium on reporting delinquencies, followed by the usual 90-day delay period. The first available data for February showed 2.7 million delinquencies, and experts suggest that number could double in the coming months.

Hello – I wanted to introduce myself as the successor to Sarina’s wonderful weekly market commentary and wish her well into retirement. Catalyst continues to appreciate your loyal readership and I'm looking forward to taking over the role. I appreciate the opportunity and am excited to be your new and ongoing source for economic updates.