US DATA: Philly Fed Manufacturing Continues To Retrench As Prices Paid Soar
Mar-20 13:17
The Philadelphia Fed's Manufacturing Business Outlook Survey General Business Conditions index fell 5.6 points to 12.5 (9.0 expected, 18.1 prior), pulling back for a second month after soaring to start the year. Expectations for 6 months ahead fell 22.2 points to a 14-month low 5.6 - compared to 53.9 in November. Both readings suggest that optimism following last November's election has more than reversed amid tariff imposition and uncertainty, with activity looking increasingly weak even as price pressures are mounting.
- This is the second regional Fed survey (NY - Empire State) that shows a deterioration of conditions continuing into March. Philly shipments fell 24.3 points to 2.0, back to Nov/Dec levels which had soared to 41 Jan / 26.3 Feb (reading between the lines, this reflects front-running tariffs). New orders likewise fell back sharply from early year highs, to 8.7 (from 21.9 Feb, 42.9 Jan).
- Interestingly though the employment index rose 14.4 points to a 29-month high, with the workweek up 6 points to 8.7 - a positive development that seems to be at odds with most other readings, but the Philadelphia Fed didn't offer any color on this.
- Also like the Empire State survey, Philly's shows a continued sharp increase in prices paid in March, rising to 48.3 from 40.5 prior, for a 32-month high.
- The other price metrics were less worrisome but still elevated: prices received fell to 29.8 from 32.9 (though the latter was a 27-month high and up from 5.6 in December). Interestingly, 6-month price expectations pulled back: paid plummeted 14 points to 44.6, a 7-month low, with received down 6.4 points to 39.7, a 6-month low. Though it's unclear whether
- We await the remaining March Fed manufacturing surveys (Kansas City, Dallas, Richmond) to complete the picture for March, but early signals are that we will continue to see mounting price pressures amid increasing concerns over manufacturing activity.
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GILT PAOF RESULTS: GBP359.749mln of the 4.00% Oct-63 Gilt sold.
Feb-18 13:03
- GBP437.500mln had been on offer.
- This leaves GBP16.898bln of the gilt in issue.
US: MNI POLITICAL RISK - US And Russian Officials Meet In Riyadh
Feb-18 12:50
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Executive summary:
- The Senate could begin voting this evening on a budget resolution to underpin a $300 billion border and defence reconciliation bill. Should Senate Majority Leader John Thune (R-SD) choose to open voting on the resolution, it would further escalate a showdown between the House and Senate over the optimum strategy for legislating Trump’s agenda.
- President Donald Trump reiterated his commitment to ‘reciprocal tariffs’, confirming that his administration will treat value-added tax (VAT) the same as tariffs.
- The Senate will vote today to confirm Howard Lutnick as Trump’s Secretary of Commerce amid reports that Commerce may have been sidelined from discussions on Trump’s trade policy.
- Talks have concluded in the Saudi capital Riyadh between delegations from the US and Russia in what could prove the first step towards peace talks to end the war in Ukraine.
- Kremlin foreign policy aide Yury Ushakov said a Trump-Putin meeting is unlikely to take place next week.
- Poll of the Day: The top House Democrat super PAC is circulating a memo laying the groundwork for Democrats to hammer Republicans on potential cuts to Medicaid.
Full article: US Daily Brief
CANADA: First Full Month Of Tax Holiday Distortion For CPI
Feb-18 12:46
- Today’s January CPI report (0830ET) is the sole CPI release between the Jan 29 and Mar 12 decisions.
- Bloomberg consensus sees a one tenth acceleration across both headline CPI (to 1.9% Y/Y) and the main cores measures (CPI-median to 2.5% Y/Y, CPI-trim to 2.6% Y/Y). The BoC targets a range of 1-3%.
- Remember that Senior Dep Gov Rogers downplayed the strength seen in CPI-trim at last month’s BoC press conference, saying the way it’s calculated has led them not to put much weight on it at this point in time.
- That leaves only one of the Bank’s three 'new' core measures actively watched, CPI-median, having abandoned CPI-common earlier in the cycle. We imagine this will start to see greater market focus on the more traditional core metrics such as CPIxFE and CPIX.
- That said, headline and CPIxFE will continue to be impacted by the two-month GST/HST holiday that began in mid-Dec (i.e. January is the first full month with the distortion vs 18 days of Dec), but median, trim and CPIX all account for indirect tax changes.
- CIBC note that the 0.0% M/M nsa that they forecast for January (which sees 1.8% Y/Y) would have been 0.4% M/M were it not for the GST impact.
- Our crude “underlying” inflation measure – an unweighted average of median, trim, CPIX and CPIxFE – stood at 3.1% annualized in the three months to December for its first time above the target range since Dec 2023 (despite CPIxFE biased lower). However, the slower moving six month run rate held at a more acceptable 2.4% annualized.
- The market currently sees a little less than 50/50 odds of another 25bp cut on Mar 12, in slight favour of a pause, although US tariff deliberations are likely a more important factor.
- The initial 25% tariffs on all Canadian products except for 10% on energy products saw a 30-day postponement until Mar 4 after Canada agreed to bolster border security, whilst 25% tariffs specifically on steel & aluminium are currently set for Mar 10.
- With downside risks to Canadian growth, GDP data for Q4 and the January advance on Feb 28 should also be watched increasingly closely after recent signs of prior monetary policy easing boosting activity.
Summary table below. Note that CIBC, National and RBC aren't included in the Bloomberg survey whilst some of the more detailed estimates from analysts more broadly are missing this time around.
