MNI US Macro Weekly: Inertia Takes Hold

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Executive Summary:

• Fed policymakers’ updated economic projections released this week summed up the uncertainty looming over the economic outlook: the FOMC left their rate cut outlook steady despite upping inflation / lowering growth forecasts (while flagging risks that those revisions didn’t go far enough).
• In the post-meeting press conference, Chair Powell characterized the lack of movement in the rate forecasts as “inertia” amid significant uncertainty over government policy shifts – particularly tariffs - a sentiment echoed by his FOMC colleagues Goolsbee and Williams in cautious post-meeting comments.
• The past week’s data did little to clarify the outlook. While jobless claims ticked up a little, there is still only a faint hint of consequential federal government layoffs, which may yet materialize in coming months.
• "Control group" core retail sales were surprisingly strong in February, but the bigger picture is that retail sales continue to slow, including for major discretionary categories such as restaurants/bars.
• Industrial production was robust in February, but it's still unclear whether a recent resurgence in manufacturing production is related to tariff front-running or a longer-term improvement. Regional Fed surveys point to weakness ahead, alongside higher price pressures.
• Residential construction activity in February was better than had been feared, but activity remains soft overall, and homebuilder sentiment is suffering from tariff uncertainty among other factors.
• Next week’s US macro calendar is back-loaded, with Q4 national account revisions and advanced trade data for February on Thursday, before Friday’s PCE report for February.