US DATA: NY Fed Services Outlook Weakest Since Pandemic Depths Or 2009
The headline NY Fed services activity index was weaker than expected in April as it failed to bounce, suggesting little upside to ISM Services after the weaker than expected 50.8 for March. However, the expectations components are particularly negative and suggest the rare pessimism in Tuesday’s manufacturing counterpart was no anomaly.
- The NY Fed services business activity index was weaker than expected in April as it failed to bounce and instead dipped to -19.8 (cons -12.1, 4 responses) after -19.3 in March.
- Other important details within the report were notably glum, with the current business climate falling further to -60.7 from -51.7 (-21.8 in Jan having averaged -24.5 in 2024 for example) to its lowest since Feb 2021.
- The six-month ahead readings broadly echo the sharp decline seen in its manufacturing counterpart released yesterday with its weakest outlook since Sep 2001.
- Here, six-month ahead business activity fell from -3.3 to -26.6 (vs 30.3 in Jan and 21.1 in 2024) for its lowest since Apr 2020 and before that Feb 2009.
- Expectations of the business climate six-months ahead meanwhile fell from -26.9 to -50.0 (vs 13.2 in Jan, 4.6 in 2024) for the lowest since Mar 2009.
- From the press release (in full here): “The future employment index turned negative. The future supply availability index dropped to -36.1, with 44 percent of firms expecting supply availability to be worse in six months. Capital spending plans turned sharply negative.”
- As with the manufacturing report, survey responses were collected between Apr 2-9 and therefore captured initial fallout from Apr 2 “Liberation Day” tariff announcements and the various changes since then.
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US DATA: Control Group Jumps But Overall Retail Momentum Still Slowing
Headline advance retail sales were much weaker than expected in February at 0.2% M/M (0.6% expected, -1.2% prior rev from -0.9%), but this was offset by strong performances in core categories. Ex-auto/gas rose 0.5% (vs 0.4% expected, with the "beat" more than offset by a downward revision to prior at -0.8% vs -0.5% prelim). But control group sales rose 1.0% vs the 0.4% expected, more than offsetting the downward revision to Jan (-1.0% vs -0.8% prelim).
- The control group reading - which is an input into GDP - was a 5-month high.
- The reason for the discrepancy between the fairly soft headline growth and the very strong control is that the latter excludes gasoline (-1.0%, weakest in 5 months, after +1.3%) and food services which unrounded was the weakest in 24 months (-1.54% after flat in Jan). That said, control group sales also exclude categories that rebounded if only to soft rates of growth: auto dealers (-0.6% after -3.8%) and building materials (+0.2%, strongest in 5 months, after -1.9%, which was the worst in 12 months).
- Bigger-picture, retail sales continue to slow: the 3M/3M annualized rate fell to 2.3% for headline (7-month low), with control group - which is a good gauge for PCE goods consumption in GDP - at 2.6% (11-month low). Ex-autos/gas 3M/3M annualized was a 56-month weakest 0.5% - the lowest since June 2020 (ie pandemic).
- This is starting to show in the Y/Y rates total at 3.1% Y/Y (4-month low), ex-autos/gas at 3.5% (6-month low), though control group picked up to 4.4% from 3.7%.
US DATA: Empire Mfg Survey Displays Further Signs Of Tariffs Disruption
The Empire State manufacturing survey had all the hallmarks of tariffs disruption in the first regional Fed mfg survey for March, with orders slipping and input price inflation at its fastest in more than two years.
- The headline manufacturing index slipped -20 (cons -2) in March from +5.7. It’s the lowest since Jan 2024 having been at its strongest reading since a particularly strong 20.2 in Nov and before that Apr 2023.
- New orders played a prominent role in latest weakness, sliding from +11.4 to -14.9, just below the -14.7 in Oct for technically the lowest since Apr 2024 and before that May 2023.
- Remember that it’s a particularly volatile survey more broadly, characterized by a monthly change standard deviation of 17pts - see the chart below for a comparison with the average regional Fed survey and ISM manufacturing.
- That said, the six month ahead measure for general business conditions has tended to be somewhat smoother and this saw another heavy decline to +12.7 for its lowest since May 2023.
- Employment dipped a little further, with -4.1 after -3.6, although that’s only the lowest since December.
- On the price side, prices paid increased further to 44.9 from 40.2 for now the highest since Feb 2023 and this continued to feed through to prices received, at 22.4 after 19.6 for the highest since May 2023.
GLOBAL POLITICAL RISK: Week Ahead 17-23 March
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MNI's Political Risk team has published its Week Ahead article looking at some of the major political events scheduled across the world over the next seven days. Includes info on US President Donald Trump's upcoming call with Vladimir Putin over the Ukraine ceasefire proposal, the vote in the German Bundestag to reform the debt brake, and the EUCO summit taking place 20-21 March.
