Week of Aug 4
A Quick Respite
The quiet data week was punctuated by tariffs taking hold on about 90 countries. Some tariffs are lower than threatened (E.U. and U.K.) due to a trade deal, while some like Canada are stark (35%) as no serious discussions appear to be underway. Mexico was granted a temporary reprieve while talks continue.
The question in much of the economic press is around the heightened odds of recession due to the weak jobs reading from a couple of weeks ago. And the discussion there is that the worst is yet to come since the impact of tariffs has yet to fully feed through to prices. Businesses do appear to be eating the tariffs as of now, but in response to clipped margins they have stopped hiring. I think the retail sales data coming on Friday will give us a very good read on where consumers stand in this debate. But in the meantime, buckle up – the next few months could prove to be troublesome.
Important Data Points From The Past Week
Bank Officers Lending Survey
There is a little reported series put out by the Fed that surveys bank lending officers every quarter about various conditions. In particular, they ask about the demand for construction loans and if they are tightening standards on construction loans.
The latest survey highlighted a couple of interesting points. First, just under 10% of bank lending officers report that they are tightening standards on loans. This has fallen substantially since 2023, but that doesn’t mean that standards are easing – essentially, banks tightened standards two years ago and have held pat on those restrictive measures since. There’s probably not much need to make lending more restrictive since demand for those loans is under water – in fact, demand weakened over the last three months.
There are a lot of measures out there that highlight backlogs, projects in planning etc. But financing is where the rubber meets the road in moving those projects through to groundbreaking and from that perspective the outlook isn’t great.
Canadian Jobs Report
The Canadian economy lost 41K jobs from June to July while the unemployment rate remained steady at 6.9%. Much of the decline was centered around information (-29K jobs) and construction (-22K jobs). On the plus side, transportation and warehousing added 26K positions and education was good for another 22K.
The Canadian labor market has been particularly resilient over the last three months, adding a total of 99K jobs between April and June. It’s hard to see this continuing over the next several months if the new tariffs stick.
What I’ll Be Watching This Week
A lot more data coming down the U.S. pike this week – two inflation reads, along with retail sales and industrial production. In Canada, we’ll get data on building permits.
What I Watched Last Week
I started watching this a few months ago but my better half didn’t like it, but now that she is away for a few days I picked it back up again. John Hamm is an incredibly talented actor and this series has the right mix of dark humor, angst, and tension.
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