US DATA: Empire State Manufacturing Outlook Weakest Since Sep 2001

Apr-15 13:15

The Empire manufacturing survey improved by more than expected in April to -8.1 (cons -13.5) after a weak -20.0 in March although forward-looking aspects in particular make for sour reading. 

  • This is the first regional Fed survey for ‘April’, conducted early in the month through Apr 2-9 which allows it to capture the first impacts of “Liberation Day” tariff announcements on Apr 2 and subsequent large fluctuations in US trade policy since.
  • To that end, both prices paid and received indexes increased to their highest levels in more than two years.
  • Looking ahead, “Firms turned pessimistic about the outlook [for the first time since 2022], with the future general business conditions index falling to its second lowest reading in the more than twenty-year history of the survey.”
  • This forward-looking index of -7.1 has fallen 44 points over the past three months, and to put it in perspective it was only lower in Sep 2001 (survey started Jul 2001). It bottomed at -5.1 in 2009.
  • Widespread drivers behind April pessimism: “New orders and shipments are expected to fall slightly in the months ahead. Capital spending plans were flat. Input and selling price increases are expected to pick up, and supply availability is expected to worsen over the next six months.”
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates

Mar-14 21:28

The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below. 

  • The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
  • More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.



 

FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten

Mar-14 21:25

Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).

  • Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
  • A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
  • Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.

 

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CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX

Mar-14 21:17
  • CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX