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MACRO ANALYSIS: MNI U.S. Macro Weekly: Tariffs Take A Toll On Sentiment

MACRO ANALYSIS
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We've just published our US Macro Weekly - Full Report Here

  • The flash Services PMI for February was the most notable single macro data print of the week as it surprisingly slipped to its first sub-50 reading since Jan 2023. The press release noted a spike in input cost pressures but services inflation hit a five year low on a lack of pricing power.
  • It was just one example among several surveys conducted in February that portrayed increasing uncertainty and inflation pressures, which appear to be reflecting the threat of tariffs and impact of other government policy shifts – a summary is below.
  • Jobless claims were close to expected, with initial claims pointing to no sign of deterioration from last month’s payrolls reference period (at a healthy level), and unsurprisingly no sign of an increase from DOGE cuts. See below for detailed context around federal layoff/buy-out headlines.
  • The minutes to the January FOMC meeting contained a surprising amount of discussion on balance sheet policy, potentially auguring a pause in QT – but it was no surprise that the FOMC expressed no hurry to cut rates again. The latter message was also conveyed by several members this week, including the first post-meeting commentary by St Louis Fed President Musalem, a hawk and 2025 voter.
  • Fed rate cut expectations are again ending the week on the softer side, with more than 40bp of cuts priced for 2025, although a next cut is still only fully priced for the September meeting.
  • The upcoming US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday.
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We've just published our US Macro Weekly - Full Report Here

  • The flash Services PMI for February was the most notable single macro data print of the week as it surprisingly slipped to its first sub-50 reading since Jan 2023. The press release noted a spike in input cost pressures but services inflation hit a five year low on a lack of pricing power.
  • It was just one example among several surveys conducted in February that portrayed increasing uncertainty and inflation pressures, which appear to be reflecting the threat of tariffs and impact of other government policy shifts – a summary is below.
  • Jobless claims were close to expected, with initial claims pointing to no sign of deterioration from last month’s payrolls reference period (at a healthy level), and unsurprisingly no sign of an increase from DOGE cuts. See below for detailed context around federal layoff/buy-out headlines.
  • The minutes to the January FOMC meeting contained a surprising amount of discussion on balance sheet policy, potentially auguring a pause in QT – but it was no surprise that the FOMC expressed no hurry to cut rates again. The latter message was also conveyed by several members this week, including the first post-meeting commentary by St Louis Fed President Musalem, a hawk and 2025 voter.
  • Fed rate cut expectations are again ending the week on the softer side, with more than 40bp of cuts priced for 2025, although a next cut is still only fully priced for the September meeting.
  • The upcoming US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday.