EM CEEMEA CREDIT: OCPMR: Moody’s affirms, neutral read

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%.

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. 

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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.