US OUTLOOK/OPINION
The 5 regional Fed manufacturing surveys (Empire, Philly, Dallas, Richmond, Kansas City) suggest that activity is pulling back slightly from January's 33-month best (based on MNI's composite average of the surveys).
- While February's composite activity levels slowed from prior, they were positive overall for the 2nd consecutive month for the first time since mid-2022.
- But we also note that inflationary pressures have clearly bottomed out for manufacturers, with prices paid rising sharply in February to some of the highest levels seen since mid-2022 when inflation pressures were on the downslope from extremely elevated levels.
- As we noted earlier this week, this is probably reflecting tariffs already announced by the Trump administration prior to the February surveys being conducted, but also contain some hint of front-running in activity amid uncertainty around future policy shifts.
- With multiple rounds of new tariffs set to hit in March and April, it's unclear whether there is any relief in sight.
- With Friday's release of MNI Chicago PMI rounding out the February surveys, we note that next week's ISM Manufacturing report shows that the headline index is seen dipping in line with the regional Feds (consensus 50.5 vs 50.9 in Jan), but for the prices category (which registered 54.9 in Jan with no consensus yet for Feb) we would not be surprised to see a figure in the high 50s or even low 60s.
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