Surveys by both the ECB and the Bank of England have indicated that banks are tightening lending standards, although credit is still flowing to at least some firms and households. Recent data suggest that the U.S. economy has proved more resilient than some had anticipated.
Although the labor market has softened and consumer sentiment has declined sharply since last fall, consumer spending has thus far held up better than expected. The economy should be supported by monetary and fiscal stimulus, a reduced drag from residential construction, further progress in the repair of financial and credit markets, and still-solid demand from abroad. However, the economy faces challenges.