Economic Update 2-10-2025
Economic data for the week included strength in broad manufacturing measures, while services decelerated but remained strong. Other releases were mixed, with construction spending up, while consumer sentiment declined. The January employment situation report showed slower job growth but upward revisions for prior months, while the unemployment rate fell.
Equities were mixed globally, with declines in the U.S. offset by gains overseas, as tariff news turned out more benign than feared. Bonds saw gains along with falling long-term interest rates. Commodities were mixed, with higher prices for metals and lower for crude oil.
U.S. stocks started down Monday morning with the imposition of 25% tariffs on Canada and Mexico (10% on Canadian energy and China). However, markets reversed a bit when tentative agreements (with conditions largely symbolic) were made with both countries to delay tariffs by a month or more. It’s assumed that these extensions may continue until the review of the USMCA trade agreement in 2026. The Chinese tariffs of 10% were kept, although far below the 60% advertised during the election campaign, with retaliation from China far less dramatic than feared. Now, focus has turned to potential tariffs on European goods, which are assumed to be focused on the auto industry, among a few critical goods there and elsewhere. Some economists have been reticent about assigning odds of dramatic tariffs happening, but the odds of at least some degree of broader tariff increase have risen.