REUTERS
"Fed's Powell sees a ways to go on shrinking Fed holdings"
By Michael S. Derby
February 12, 2025
NEW YORK, Feb 12 (Reuters) - Over two days of testimony this week before Congress, Federal Reserve Chairman Jerome Powell indicated there's no imminent end to the central bank's balance sheet wind down process, as some banks have moved to push back their own end date for a process commonly referred to as quantitative tightening.
“I think we have a ways to go” on reducing the size of central bank bond holdings and there are no signs yet that market liquidity has shrunk enough to affect the Fed's reduction in holdings of Treasury and mortgage bonds, Powell told a House panel Wednesday.
Powell's observations on quantitative tightening, or QT, comes as the Fed has shed just over $2 trillion from its holdings.
The Fed is seeking to extinguish liquidity it added to markets during the COVID-19 pandemic, when it bought trillions in bonds to stabilize markets and goose economic growth by lowering longer term borrowing costs.
Since the Fed began QT it has been seeking to reduce overall market liquidity, most clearly measured in the level of bank reserves, to levels that allow for normal levels of money market interest rate volatility, while allowing the Fed firm control over the federal funds rate, its main tool to influence the momentum of the economy.
The Fed is also trying to avoid a replay of the events of September 2019 when, during its last chapter of QT, too much liquidity got taken out of the system, requiring the Fed to start adding it back in aggressively.
The Fed has taken a number of steps to avoid this happening again, like slowing the pace of its drawdown and setting up new liquidity facilities, while providing more guidance about the factors it is watching.
But it has struggled to offer much guidance about when it can stop QT, except to say that day doesn't appear imminent.
Over recent days, some banks have pushed back their QT endgame estimates relative to the most recent consensus, which eyed a June stop date.
"Recent communication suggests that the Fed is content to let QT continue to run despite the potential for low visibility into reserve demand over the coming months due to debt limit dynamics," economists at Goldman Sachs said in a report Friday.
Bank forecasters said that while they'd expected the Fed to wind up the drawdown at the end of the second quarter, now they see that happening at the close of the third quarter, with Treasury bond run off stopping at the end of the second quarter and mortgage run off ended by the third quarter.
Morgan Stanley economists also kicked the QT can down the road.
"Still-abundant reserves and lack of significant pressures in money markets at month-end make it unlikely the Fed will change its balance sheet normalization plans in March as we previously expected," they wrote to clients.
"We adjust our baseline view for an end to QT in June," which would take Fed holdings to $6.33 trillion.
Reporting by Michael S. Derby; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/feds ... 025-02-12/
THE ECONOMY
Re: THE ECONOMY
REUTERS
"US posts $129 billion January deficit on calendar shifts, higher outlays"
By David Lawder
February 12, 2025
Summary
* Treasury says $87 bln of February benefits shifted to January
* No plans to break out Musk's DOGE savings-Treasury official
* Customs duties rose, but do not reflect Trump tariff orders
* Costs grow for debt interest, Social Security, Medicare grow
WASHINGTON, Feb 12 (Reuters) - The federal government posted a $129 billion budget deficit for January, up sharply from an unusually low $22 billion deficit in January 2024 due to benefit payment calendar shifts and higher outlays for Social Security, Medicare, interest and other costs, the U.S. Treasury said on Wednesday.
The January budget results, the last reflecting fiscal management of former president Joe Biden's administration, showed that January receipts to grew 8% or $36 billion from a year earlier, to $513 billion.
January outlays rose 29% or $143 billion from a year earlier to $642 billion.
Excluding the calendar shifts, including the payment of $87 billion worth of February benefits at the end of January, the Treasury said the adjusted deficit increase for the month would have been $21 billion instead of the reported $107 billion.
A U.S. Treasury official said there were no plans at this stage to include any details on savings found by Elon Musk's unofficial Department of Government Efficiency drive to slash federal spending in the Monthly Treasury Statement.
Thus far, there is little evidence of tangible savings from the DOGE efforts and a Musk team's access to the Treasury's vast payments system sparked an outcry before a judge issued a temporary restraining order that excludes Treasury Secretary Scott Bessent.
The Treasury reported a record $840 billion U.S. deficit for the first four months of fiscal 2025, which started on October 1.
That was up 58% or $308 billion from a year earlier, an increase that a Treasury official said was due partly to the prior year tax receipts being inflated by some $85 billion deferred tax payments from the previous fiscal year.
Year-to-date receipts came in at $1.596 trillion, up 1% or $11 billion from the same period a year earlier, while outlays totaled $2.436 trillion, up 15% or $319 billion from the prior year period.
Both outlays and receipts for the first four months of fiscal 2025 also were records for the period, the Treasury official said.
FEMA SPENDING IMPACT
Tax receipts for the fiscal year year-to-date showed a 6% increase for individual withheld taxes, but substantial declines for non-withheld and corporate tax receipts.
Weather-related tax deferrals in 2023 pushed many payments into the first months of fiscal 2024, inflating the prior-year comparison.
Customs receipts for the first four months of fiscal 2025 were up $3 billion, or 12%, but the official said this does not reflect any of President Donald Trump's imposition of a new 10% tariff on Chinese imports, which went into effect in Feb. 4.
Year-to-date outlays were up 43% or $12 billion for the Department of Homeland Security due to increased hurricane and California wildfire relief expenses, while the Treasury's public debt interest expenses rose 10% or $35 billion to $392 billion.
Military spending in the year-to-date period rose 13% or $35 billion to $318 billion, while outlays for Social Security, the largest single expense item rose 8% or $41 billion to $529 billion.
Reporting by David Lawder; Editing by Andrea Ricci and Nick Zieminski
https://www.reuters.com/world/us/us-pos ... 025-02-12/
"US posts $129 billion January deficit on calendar shifts, higher outlays"
By David Lawder
February 12, 2025
Summary
* Treasury says $87 bln of February benefits shifted to January
* No plans to break out Musk's DOGE savings-Treasury official
* Customs duties rose, but do not reflect Trump tariff orders
* Costs grow for debt interest, Social Security, Medicare grow
WASHINGTON, Feb 12 (Reuters) - The federal government posted a $129 billion budget deficit for January, up sharply from an unusually low $22 billion deficit in January 2024 due to benefit payment calendar shifts and higher outlays for Social Security, Medicare, interest and other costs, the U.S. Treasury said on Wednesday.
The January budget results, the last reflecting fiscal management of former president Joe Biden's administration, showed that January receipts to grew 8% or $36 billion from a year earlier, to $513 billion.
January outlays rose 29% or $143 billion from a year earlier to $642 billion.
Excluding the calendar shifts, including the payment of $87 billion worth of February benefits at the end of January, the Treasury said the adjusted deficit increase for the month would have been $21 billion instead of the reported $107 billion.
A U.S. Treasury official said there were no plans at this stage to include any details on savings found by Elon Musk's unofficial Department of Government Efficiency drive to slash federal spending in the Monthly Treasury Statement.
Thus far, there is little evidence of tangible savings from the DOGE efforts and a Musk team's access to the Treasury's vast payments system sparked an outcry before a judge issued a temporary restraining order that excludes Treasury Secretary Scott Bessent.
The Treasury reported a record $840 billion U.S. deficit for the first four months of fiscal 2025, which started on October 1.
That was up 58% or $308 billion from a year earlier, an increase that a Treasury official said was due partly to the prior year tax receipts being inflated by some $85 billion deferred tax payments from the previous fiscal year.
Year-to-date receipts came in at $1.596 trillion, up 1% or $11 billion from the same period a year earlier, while outlays totaled $2.436 trillion, up 15% or $319 billion from the prior year period.
Both outlays and receipts for the first four months of fiscal 2025 also were records for the period, the Treasury official said.
FEMA SPENDING IMPACT
Tax receipts for the fiscal year year-to-date showed a 6% increase for individual withheld taxes, but substantial declines for non-withheld and corporate tax receipts.
Weather-related tax deferrals in 2023 pushed many payments into the first months of fiscal 2024, inflating the prior-year comparison.
Customs receipts for the first four months of fiscal 2025 were up $3 billion, or 12%, but the official said this does not reflect any of President Donald Trump's imposition of a new 10% tariff on Chinese imports, which went into effect in Feb. 4.
Year-to-date outlays were up 43% or $12 billion for the Department of Homeland Security due to increased hurricane and California wildfire relief expenses, while the Treasury's public debt interest expenses rose 10% or $35 billion to $392 billion.
Military spending in the year-to-date period rose 13% or $35 billion to $318 billion, while outlays for Social Security, the largest single expense item rose 8% or $41 billion to $529 billion.
Reporting by David Lawder; Editing by Andrea Ricci and Nick Zieminski
https://www.reuters.com/world/us/us-pos ... 025-02-12/
Re: THE ECONOMY
CNBC
"Producer prices report points to softer Fed inflation measure than feared"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Thu, Feb 13 2025
Key Points
* The producer price index increased by a seasonally adjusted 0.4% on the month, compared with the Dow Jones estimate for 0.3%.
* Stock market futures moved slightly higher following the release while Treasury yields fell. Wall Street strategists cited details of the report that suggested a slightly more benign inflation picture.
A gauge of wholesale prices rose more than expected in January, though some details of the report indicated that pipeline inflation pressures are easing.
The producer price index, which measures what producers get for their goods and services, increased by a seasonally adjusted 0.4% on the month, compared with the Dow Jones estimate for 0.3%, the Bureau of Labor Statistics reported Thursday.
Excluding food and energy, the core PPI was up 0.3%, in line with the forecast.
Stock market futures moved higher following the release while Treasury yields were sharply lower, despite the higher-than-expected headline number.
Wall Street strategists cited details of the report that suggested a slightly more benign inflation picture.
In particular, some costs related to health care showed easing — physician care, for instance, fell 0.5%.
Also, domestic airfares declined by 0.3% and brokerage services prices were off 2.2%.
Over the past year, the all-items PPI increased 3.5%, well ahead of the central bank’s objective.
Futures pricing indicates the market now does not expect the Fed to lower its benchmark interest rate again until October.
While the producer and consumer price index releases are widely cited inflation gauges, they are not the principal ones the Fed uses.
Rather, the central bank focuses on the personal consumption expenditures prices index, which the Commerce Department will release later in February.
The PPI and CPI releases do feed into that measure.
Fed Chair Jerome Powell on Wednesday noted the Fed’s greater focus on the PCE measure, while telling the House Financial Services Committee that “we’re not quite there yet” on inflation though he cited “great progress” made so far.
Putting the data together, the core PCE measure likely will show a 0.22% increase, down from 0.45% in December, according to Citigroup estimates.
That would push the annual inflation rate down to 2.5%, the firm said.
The PPI release comes the day after the BLS reported that the consumer price index rose 0.5% on the month, putting the annual inflation rate at 3% and well out of reach of the Fed’s 2% long-run goal.
Together, the reports are pushing back expectations for a rate cut until the second half of the year, though inflation data can be volatile and the outlook could change depending on what subsequent months show.
“Wholesale price growth came in slightly higher than expected for January, and the read for December was adjusted upward,” said Elizabeth Renter, senior economist at personal finance site NerdWallet.
“In other words, inflation at the producer level remains high, and one concern is that this inflation could ultimately be passed along to consumers.”
Revisions to the December numbers also complicated the inflation picture, with the gain now put at 0.5%, compared with the 0.2% increase previously reported.
In January, producer prices for services increased 0.3% while goods rose 0.6%.
Services prices were led by a 5.7% jump in the traveler accommodation services category, which the BLS said accounted for more than one-third of the gain.
On the goods side, a 10.4% surge in diesel fuel costs was a significant factor.
The PPI data also reflected the massive jump in egg prices as farmers destroy millions of chickens to prevent the spread of avian flu.
Eggs for fresh use exploded 44% higher on the month and were up 186.4% from a year ago.
In other economic news Thursday, the Labor Department reported that initial filings for unemployment claims changed little for the week ended Feb. 8.
Claims totaled 213,000, a decrease of 7,000 from the prior period and close to the 215,000 estimate.
Continuing claims, which run a week behind, fell to 1.85 million, down 36,000.
https://www.cnbc.com/2025/02/13/ppi-january-2025-.html
"Producer prices report points to softer Fed inflation measure than feared"
Jeff Cox @jeff.cox.7528 @JeffCoxCNBCcom
Published Thu, Feb 13 2025
Key Points
* The producer price index increased by a seasonally adjusted 0.4% on the month, compared with the Dow Jones estimate for 0.3%.
* Stock market futures moved slightly higher following the release while Treasury yields fell. Wall Street strategists cited details of the report that suggested a slightly more benign inflation picture.
A gauge of wholesale prices rose more than expected in January, though some details of the report indicated that pipeline inflation pressures are easing.
The producer price index, which measures what producers get for their goods and services, increased by a seasonally adjusted 0.4% on the month, compared with the Dow Jones estimate for 0.3%, the Bureau of Labor Statistics reported Thursday.
Excluding food and energy, the core PPI was up 0.3%, in line with the forecast.
Stock market futures moved higher following the release while Treasury yields were sharply lower, despite the higher-than-expected headline number.
Wall Street strategists cited details of the report that suggested a slightly more benign inflation picture.
In particular, some costs related to health care showed easing — physician care, for instance, fell 0.5%.
Also, domestic airfares declined by 0.3% and brokerage services prices were off 2.2%.
Over the past year, the all-items PPI increased 3.5%, well ahead of the central bank’s objective.
Futures pricing indicates the market now does not expect the Fed to lower its benchmark interest rate again until October.
While the producer and consumer price index releases are widely cited inflation gauges, they are not the principal ones the Fed uses.
Rather, the central bank focuses on the personal consumption expenditures prices index, which the Commerce Department will release later in February.
The PPI and CPI releases do feed into that measure.
Fed Chair Jerome Powell on Wednesday noted the Fed’s greater focus on the PCE measure, while telling the House Financial Services Committee that “we’re not quite there yet” on inflation though he cited “great progress” made so far.
Putting the data together, the core PCE measure likely will show a 0.22% increase, down from 0.45% in December, according to Citigroup estimates.
That would push the annual inflation rate down to 2.5%, the firm said.
The PPI release comes the day after the BLS reported that the consumer price index rose 0.5% on the month, putting the annual inflation rate at 3% and well out of reach of the Fed’s 2% long-run goal.
Together, the reports are pushing back expectations for a rate cut until the second half of the year, though inflation data can be volatile and the outlook could change depending on what subsequent months show.
“Wholesale price growth came in slightly higher than expected for January, and the read for December was adjusted upward,” said Elizabeth Renter, senior economist at personal finance site NerdWallet.
“In other words, inflation at the producer level remains high, and one concern is that this inflation could ultimately be passed along to consumers.”
Revisions to the December numbers also complicated the inflation picture, with the gain now put at 0.5%, compared with the 0.2% increase previously reported.
In January, producer prices for services increased 0.3% while goods rose 0.6%.
Services prices were led by a 5.7% jump in the traveler accommodation services category, which the BLS said accounted for more than one-third of the gain.
On the goods side, a 10.4% surge in diesel fuel costs was a significant factor.
The PPI data also reflected the massive jump in egg prices as farmers destroy millions of chickens to prevent the spread of avian flu.
Eggs for fresh use exploded 44% higher on the month and were up 186.4% from a year ago.
In other economic news Thursday, the Labor Department reported that initial filings for unemployment claims changed little for the week ended Feb. 8.
Claims totaled 213,000, a decrease of 7,000 from the prior period and close to the 215,000 estimate.
Continuing claims, which run a week behind, fell to 1.85 million, down 36,000.
https://www.cnbc.com/2025/02/13/ppi-january-2025-.html
Re: THE ECONOMY
REUTERS
"US weekly jobless claims decline amid stable labor market"
By Reuters
February 13, 2025
WASHINGTON, Feb 13 (Reuters) - The number of Americans filing new applications for unemployment benefits decreased last week, suggesting the labor market remained stable early in February.
Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 213,000 for the week ended February 8, the Labor Department said on Thursday.
Economists polled by Reuters had forecast 215,000 claims for the latest week.
Claims have trended lower so far this year, consistent with historically low layoffs.
That is helping to underpin the economic expansion, allowing the Federal Reserve to pause interest rate cuts while it assesses the impact of policies by President Donald Trump's administration.
Economists view Trump's push for mass deportations of undocumented immigrants, tariffs on imports and tax cuts as inflationary.
The U.S. central bank left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range last month, having reduced it by 100 basis points since September, when it embarked on its policy easing cycle.
The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
Despite low layoffs, employment opportunities for those who lose their jobs are no longer as abundant as they were a year or so ago, with businesses adopting a wait and see attitude.
Nonfarm payrolls increased by 143,000 jobs in January, while the unemployment rate was at 4.0%.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, declined 36,000 to a seasonally adjusted 1.850 million during the week ending February 1, the claims report showed.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-w ... 025-02-13/
"US weekly jobless claims decline amid stable labor market"
By Reuters
February 13, 2025
WASHINGTON, Feb 13 (Reuters) - The number of Americans filing new applications for unemployment benefits decreased last week, suggesting the labor market remained stable early in February.
Initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 213,000 for the week ended February 8, the Labor Department said on Thursday.
Economists polled by Reuters had forecast 215,000 claims for the latest week.
Claims have trended lower so far this year, consistent with historically low layoffs.
That is helping to underpin the economic expansion, allowing the Federal Reserve to pause interest rate cuts while it assesses the impact of policies by President Donald Trump's administration.
Economists view Trump's push for mass deportations of undocumented immigrants, tariffs on imports and tax cuts as inflationary.
The U.S. central bank left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range last month, having reduced it by 100 basis points since September, when it embarked on its policy easing cycle.
The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
Despite low layoffs, employment opportunities for those who lose their jobs are no longer as abundant as they were a year or so ago, with businesses adopting a wait and see attitude.
Nonfarm payrolls increased by 143,000 jobs in January, while the unemployment rate was at 4.0%.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, declined 36,000 to a seasonally adjusted 1.850 million during the week ending February 1, the claims report showed.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-w ... 025-02-13/
Re: THE ECONOMY
REUTERS
"US producer inflation trends higher; labor market remains stable"
By Lucia Mutikani
February 13, 2025
Summary
* Producer prices increase 0.4% in January
* December rise in the PPI revised up to 0.5% from 0.2%
* Producer prices gain 3.5% year-on-year
* Weekly jobless claims fall 7,000 to 213,000
* Continuing claims decrease 36,000 to 1.850 million
WASHINGTON, Feb 13 (Reuters) - U.S. producer prices increased solidly in January, offering more evidence inflation was picking up again and strengthening financial market views that the Federal Reserve would not be cutting interest rates before the second half of the year.
The broad rise in producer inflation reported by the Labor Department on Thursday followed on the heels of news on Wednesday that consumer prices accelerated by the most in nearly 1-1/2 years in January.
Some details of the report, however, suggested a more moderate increase in January in the key inflation measures tracked by the U.S. central bank for its 2% target than had been anticipated in the wake of the strong CPI data.
Economists warned inflation was set to trend even higher as President Donald Trump presses ahead with broad tariffs on imports as well as mass deportations that could cause labor shortages and raise wages and prices of goods.
"The report does give pause to rate cut expectations, however, as higher business costs are likely to translate into upward pressure on consumer prices in the months to come," said Kurt Rankin, a senior economist at PNC Financial.
"Tariffs continue to be threatened by the Trump administration, which would raise costs for businesses across the board."
The producer price index for final demand rose 0.4% last month after an upwardly revised 0.5% gain in December, the Labor Department's Bureau of Labor Statistics (BLS) said.
Economists polled by Reuters had forecast the PPI rising 0.3%.
In the 12 months through January, the PPI advanced 3.5% after increasing by the same margin in December.
With January's PPI report, the BLS updated weights to reflect price movements in 2024, and seasonal adjustment factors, the model that the government uses to iron out seasonal fluctuations from the data.
The rise in the PPI was across goods and services.
Wholesale goods prices jumped 0.6% after rising 0.5% in December.
More than half of the increase came from a 1.7% jump in energy goods prices.
Food prices shot up 1.1%, with egg prices soaring 44.0% amid an avian flu outbreak.
Excluding food and energy, goods prices edged up 0.1% for a second straight month.
Services increased 0.3% after climbing 0.5% in December.
A 5.7% surge in wholesale prices of hotel and motel rooms accounted for more than a third of the increase in services.
There were also increases in wholesale prices of automobile retailing, transportation of freight by road, food and alcohol retailing as well as apparel, jewelry, footwear and accessories retailing and bundled wired telecommunications.
But margins for fuels and lubricants retailing fell 9.8%.
Portfolio management fees rose 0.4%, while airline fares decreased 0.3%.
Physician care prices declined 0.5% and the cost of hospital inpatient care fell 0.3%.
Hospital outpatient care prices declined 0.4%.
Portfolio management fees, healthcare, hotel and motel accommodation and airline fares are among the components that go into the calculation of the personal consumption expenditures (PCE) price index, excluding food and energy, one of the measures tracked by the Fed for monetary policy.
With the CPI and PPI data in hand, economists' estimates for the increase in the core PCE price index in January ranged from 0.2% to 0.3%.
That was lower than the 0.4% gain most had forecast after the CPI data.
Core inflation climbed 0.2% in December.
It was forecast increasing 2.6% year-on-year in January, down from the 2.7% estimated following the CPI report.
Annual core inflation was 2.8% in December.
"The Fed still can declare, therefore, that progress in returning inflation to its 2% objective is still being made," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Stocks on Wall Street rose as investors focused on the anticipated tame core PCE inflation readings.
The dollar fell against a basket of currencies.
U.S. Treasury yields slipped.
STABLE LABOR MARKET
Financial markets have pushed back rate cut expectations to September from June, though some economists believe the window for further policy easing has closed, citing strong domestic demand and a stable labor market.
Fed Chair Jerome Powell told lawmakers on Wednesday "we are close but not there on inflation," adding "we want to keep policy restrictive for now."
The Fed left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range in January, having reduced it by 100 basis points since September, when it launched its policy easing cycle.
The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
The Trump administration's fiscal, trade and immigration policies are seen fanning inflation.
A 25% tariff on goods from Canada and Mexico was suspended until March.
But a 10% additional tariff on Chinese goods went into effect this month.
Labor market stability was confirmed by a separate report from the Labor Department showing initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 213,000 for the week ended February 8.
Economists had forecast 215,000 claims for the latest week.
Claims have trended lower so far this year, consistent with historically low layoffs and helping to underpin the economic expansion.
Nonetheless, employment opportunities for those who lose their jobs are no longer as abundant as they were a year or so ago, with businesses adopting a wait and see attitude.
Nonfarm payrolls increased by 143,000 jobs in January, while the unemployment rate was at 4.0%.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, declined 36,000 to a seasonally adjusted 1.850 million during the week ending February 1, the claims report showed.
"The business sector remains in wait-and-see mode to see what, if any, disruptions there may be for global supply chains as price uncertainty makes it more difficult to expand operations," said Ben Ayers, senior economist at Nationwide.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-p ... 025-02-13/
"US producer inflation trends higher; labor market remains stable"
By Lucia Mutikani
February 13, 2025
Summary
* Producer prices increase 0.4% in January
* December rise in the PPI revised up to 0.5% from 0.2%
* Producer prices gain 3.5% year-on-year
* Weekly jobless claims fall 7,000 to 213,000
* Continuing claims decrease 36,000 to 1.850 million
WASHINGTON, Feb 13 (Reuters) - U.S. producer prices increased solidly in January, offering more evidence inflation was picking up again and strengthening financial market views that the Federal Reserve would not be cutting interest rates before the second half of the year.
The broad rise in producer inflation reported by the Labor Department on Thursday followed on the heels of news on Wednesday that consumer prices accelerated by the most in nearly 1-1/2 years in January.
Some details of the report, however, suggested a more moderate increase in January in the key inflation measures tracked by the U.S. central bank for its 2% target than had been anticipated in the wake of the strong CPI data.
Economists warned inflation was set to trend even higher as President Donald Trump presses ahead with broad tariffs on imports as well as mass deportations that could cause labor shortages and raise wages and prices of goods.
"The report does give pause to rate cut expectations, however, as higher business costs are likely to translate into upward pressure on consumer prices in the months to come," said Kurt Rankin, a senior economist at PNC Financial.
"Tariffs continue to be threatened by the Trump administration, which would raise costs for businesses across the board."
The producer price index for final demand rose 0.4% last month after an upwardly revised 0.5% gain in December, the Labor Department's Bureau of Labor Statistics (BLS) said.
Economists polled by Reuters had forecast the PPI rising 0.3%.
In the 12 months through January, the PPI advanced 3.5% after increasing by the same margin in December.
With January's PPI report, the BLS updated weights to reflect price movements in 2024, and seasonal adjustment factors, the model that the government uses to iron out seasonal fluctuations from the data.
The rise in the PPI was across goods and services.
Wholesale goods prices jumped 0.6% after rising 0.5% in December.
More than half of the increase came from a 1.7% jump in energy goods prices.
Food prices shot up 1.1%, with egg prices soaring 44.0% amid an avian flu outbreak.
Excluding food and energy, goods prices edged up 0.1% for a second straight month.
Services increased 0.3% after climbing 0.5% in December.
A 5.7% surge in wholesale prices of hotel and motel rooms accounted for more than a third of the increase in services.
There were also increases in wholesale prices of automobile retailing, transportation of freight by road, food and alcohol retailing as well as apparel, jewelry, footwear and accessories retailing and bundled wired telecommunications.
But margins for fuels and lubricants retailing fell 9.8%.
Portfolio management fees rose 0.4%, while airline fares decreased 0.3%.
Physician care prices declined 0.5% and the cost of hospital inpatient care fell 0.3%.
Hospital outpatient care prices declined 0.4%.
Portfolio management fees, healthcare, hotel and motel accommodation and airline fares are among the components that go into the calculation of the personal consumption expenditures (PCE) price index, excluding food and energy, one of the measures tracked by the Fed for monetary policy.
With the CPI and PPI data in hand, economists' estimates for the increase in the core PCE price index in January ranged from 0.2% to 0.3%.
That was lower than the 0.4% gain most had forecast after the CPI data.
Core inflation climbed 0.2% in December.
It was forecast increasing 2.6% year-on-year in January, down from the 2.7% estimated following the CPI report.
Annual core inflation was 2.8% in December.
"The Fed still can declare, therefore, that progress in returning inflation to its 2% objective is still being made," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Stocks on Wall Street rose as investors focused on the anticipated tame core PCE inflation readings.
The dollar fell against a basket of currencies.
U.S. Treasury yields slipped.
STABLE LABOR MARKET
Financial markets have pushed back rate cut expectations to September from June, though some economists believe the window for further policy easing has closed, citing strong domestic demand and a stable labor market.
Fed Chair Jerome Powell told lawmakers on Wednesday "we are close but not there on inflation," adding "we want to keep policy restrictive for now."
The Fed left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range in January, having reduced it by 100 basis points since September, when it launched its policy easing cycle.
The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
The Trump administration's fiscal, trade and immigration policies are seen fanning inflation.
A 25% tariff on goods from Canada and Mexico was suspended until March.
But a 10% additional tariff on Chinese goods went into effect this month.
Labor market stability was confirmed by a separate report from the Labor Department showing initial claims for state unemployment benefits fell 7,000 to a seasonally adjusted 213,000 for the week ended February 8.
Economists had forecast 215,000 claims for the latest week.
Claims have trended lower so far this year, consistent with historically low layoffs and helping to underpin the economic expansion.
Nonetheless, employment opportunities for those who lose their jobs are no longer as abundant as they were a year or so ago, with businesses adopting a wait and see attitude.
Nonfarm payrolls increased by 143,000 jobs in January, while the unemployment rate was at 4.0%.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, declined 36,000 to a seasonally adjusted 1.850 million during the week ending February 1, the claims report showed.
"The business sector remains in wait-and-see mode to see what, if any, disruptions there may be for global supply chains as price uncertainty makes it more difficult to expand operations," said Ben Ayers, senior economist at Nationwide.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-p ... 025-02-13/
Re: THE ECONOMY
REUTERS
"NY Fed finds rising consumer debt amid some fraying for car loans"
By Michael S. Derby
February 13, 2025
Summary
* NY Fed data finds rise in total household debt to $18.04 trillion
* NY Fed says consumers in 'pretty good shape' on debt front
* NY Fed data flags issues with borrowing for automobiles
Feb 13 (Reuters) - Overall debt levels held by Americans rose modestly in the final quarter of last year on a healthy consumer sector, even as automobile borrowing faced some turbulence, the Federal Reserve Bank of New York said on Thursday.
“Consumers are in pretty good shape in terms of the household debt landscape, largely driven by stable balances and solid performance in mortgage loans,” the bank said in a posting detailing the findings on its latest report on the state of household debt, this time for the fourth quarter of 2024.
“However, for auto loans, higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum,” New York Fed economists wrote.
New York Fed researchers said that borrowing levels relative to income are pretty stable and still below levels seen before the COVID-19 pandemic, even as some sectors like car lending face some trouble.
The bank’s borrowing data details conditions for an economy with solid growth and low unemployment, even as inflation pressures remain elevated and short-term interest rates are high.
The Fed’s current monetary policy stance has increased borrowing costs broadly, most notably chilling activity in the housing market.
In the report, the bank said total household debt at the end of the year rose by 0.5% to $18.04 trillion.
Overall debt levels are also up by $3.9 trillion since the end of 2019, before the onset of the pandemic.
Credit card balances rose $45 billion from the prior quarter to $1.21 trillion, while mortgage balances ticked up $11 billion to $12.61 trillion amid a rise in mortgage creation during the quarter.
The report said that auto loan balances rose by $11 billion to $1.66 trillion versus the prior quarter.
The New York Fed report also detected some ongoing fraying on the credit front, with 3.6% of debt in some form of trouble during the quarter, up slightly from the prior quarter’s 3.5% rate.
The report said debt moving into troubled status was steady across all borrowing types with the exception of credit cards, which saw a “small uptick” in the transition into delinquency.
Borrowing transitioning into serious delinquency, which means past due for three months or longer, “edged up” for auto loans, credit cards, home credit lines but was stable for mortgages, the report said.
The New York Fed report zeroed in on issues with lending for automobiles.
There, issues with rising prices and high borrowing rates have hit borrowers differently at different income levels, notably for those who bought expensive used cars during the pandemic and who may be underwater on loans now.
But things may improve.
“The decline in auto prices could imply that the more recently originated vintages of auto loans may fare better as those loans age,” New York Fed economists wrote.
More broadly, bank data showed that around 123,000 consumers had a bankruptcy notation added to their credit record, down from the third quarter.
Consumers with a third—party collection noted on their credit record was “relatively stable” in the fourth quarter, the bank said.
Reporting by Michael S. Derby; Editing by Andrea Ricci
https://www.reuters.com/markets/us/ny-f ... 025-02-13/
"NY Fed finds rising consumer debt amid some fraying for car loans"
By Michael S. Derby
February 13, 2025
Summary
* NY Fed data finds rise in total household debt to $18.04 trillion
* NY Fed says consumers in 'pretty good shape' on debt front
* NY Fed data flags issues with borrowing for automobiles
Feb 13 (Reuters) - Overall debt levels held by Americans rose modestly in the final quarter of last year on a healthy consumer sector, even as automobile borrowing faced some turbulence, the Federal Reserve Bank of New York said on Thursday.
“Consumers are in pretty good shape in terms of the household debt landscape, largely driven by stable balances and solid performance in mortgage loans,” the bank said in a posting detailing the findings on its latest report on the state of household debt, this time for the fourth quarter of 2024.
“However, for auto loans, higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum,” New York Fed economists wrote.
New York Fed researchers said that borrowing levels relative to income are pretty stable and still below levels seen before the COVID-19 pandemic, even as some sectors like car lending face some trouble.
The bank’s borrowing data details conditions for an economy with solid growth and low unemployment, even as inflation pressures remain elevated and short-term interest rates are high.
The Fed’s current monetary policy stance has increased borrowing costs broadly, most notably chilling activity in the housing market.
In the report, the bank said total household debt at the end of the year rose by 0.5% to $18.04 trillion.
Overall debt levels are also up by $3.9 trillion since the end of 2019, before the onset of the pandemic.
Credit card balances rose $45 billion from the prior quarter to $1.21 trillion, while mortgage balances ticked up $11 billion to $12.61 trillion amid a rise in mortgage creation during the quarter.
The report said that auto loan balances rose by $11 billion to $1.66 trillion versus the prior quarter.
The New York Fed report also detected some ongoing fraying on the credit front, with 3.6% of debt in some form of trouble during the quarter, up slightly from the prior quarter’s 3.5% rate.
The report said debt moving into troubled status was steady across all borrowing types with the exception of credit cards, which saw a “small uptick” in the transition into delinquency.
Borrowing transitioning into serious delinquency, which means past due for three months or longer, “edged up” for auto loans, credit cards, home credit lines but was stable for mortgages, the report said.
The New York Fed report zeroed in on issues with lending for automobiles.
There, issues with rising prices and high borrowing rates have hit borrowers differently at different income levels, notably for those who bought expensive used cars during the pandemic and who may be underwater on loans now.
But things may improve.
“The decline in auto prices could imply that the more recently originated vintages of auto loans may fare better as those loans age,” New York Fed economists wrote.
More broadly, bank data showed that around 123,000 consumers had a bankruptcy notation added to their credit record, down from the third quarter.
Consumers with a third—party collection noted on their credit record was “relatively stable” in the fourth quarter, the bank said.
Reporting by Michael S. Derby; Editing by Andrea Ricci
https://www.reuters.com/markets/us/ny-f ... 025-02-13/
Re: THE ECONOMY
REUTERS
"US power companies increase data center demand spending as DeepSeek fears wane"
By Laila Kearney
February 13, 2025
Summary
* PPL to boost capital spending by 40% through 2028
* US AI power demand so far undimmed by Chinese startup DeepSeek
* US power demand to hit records this year and next, EIA forecasts
Feb 13 (Reuters) - U.S. electric utilities are adding tens of billions of dollars to spending plans to build new power supplies and bolster the grid as data centers for artificial intelligence and cloud computing drive up energy demand.
In company earnings calls on Thursday, PPL Corp said it would increase its capital investments through 2028 by nearly 40% to $20 billion.
Dominion, which serves the world's largest data center market in Northern Virginia, and utility giant Exelon both revised up capital plans earlier in the week.
The investments will also be used to provide power to the utilities' broader range of customers.
The significant upward revisions to capital investments indicate a continued rapid rise of data center power consumption and reject concerns that market gains by Chinese AI startup DeepSeek, which eroded power company share prices at the start of the year, would slash Big Tech's power demand.
"It continues to be full speed ahead," said Bill Fehrman, CEO of Ohio-based American Electric Power, which is considering adding $10 billion to its record $54 billion capital expenditure plan through the end of the decade.
After previously little-known DeepSeek drew national attention late last month, Fehrman said data center customers told AEP that they would continue their voracious pursuit of electricity supplies.
Executives with Duke, which is hiking its five-year plan by $10 billion, and Exelon similarly said that technology industry customers assured them there would be no slowing of their development of giant computer warehouses.
"We've not seen any changes in tone," Duke CFO Brian Savoy told Reuters.
U.S. electricity demand is projected to reach record highs this year and in 2026, according to the Energy Information Administration.
In addition to the rise of data centers, manufacturing and the electrification of industries like transportation are also spurring power consumption.
The country's data centers, however, are being built at an unusually large scale.
Data centers, which typically had a capacity of 20 megawatts, are now being constructed at as much as 1,000 megawatts, or 1 gigawatt, at a single site.
That's enough to power all of the homes in a major U.S. city.
PPL said it has 9 gigawatts in advanced stages of development and AEP said it has commitments for another 20 gigawatts of largely data center customers through 2030.
Utility spending is not a sure bet with many utilities needing to have their plans approved by state regulators.
Growing capital plans, which include new electricity generation and transmission lines, generally also lead to rising power bills for everyday homes and business.
It's unclear, however, whether some companies will include special provisions for data centers requiring them to bear more grid-related costs.
Utilities like AEP and Exelon are currently involved in regulatory fights over how to develop power contracts specific to data centers and other very large customers.
Reporting by Laila Kearney in New York, Seher Dareen and Vallari Srivastava in Bengaluru; Editing by Maju Samuel, Nia Williams and David Gregorio
https://www.reuters.com/business/energy ... 025-02-13/
"US power companies increase data center demand spending as DeepSeek fears wane"
By Laila Kearney
February 13, 2025
Summary
* PPL to boost capital spending by 40% through 2028
* US AI power demand so far undimmed by Chinese startup DeepSeek
* US power demand to hit records this year and next, EIA forecasts
Feb 13 (Reuters) - U.S. electric utilities are adding tens of billions of dollars to spending plans to build new power supplies and bolster the grid as data centers for artificial intelligence and cloud computing drive up energy demand.
In company earnings calls on Thursday, PPL Corp said it would increase its capital investments through 2028 by nearly 40% to $20 billion.
Dominion, which serves the world's largest data center market in Northern Virginia, and utility giant Exelon both revised up capital plans earlier in the week.
The investments will also be used to provide power to the utilities' broader range of customers.
The significant upward revisions to capital investments indicate a continued rapid rise of data center power consumption and reject concerns that market gains by Chinese AI startup DeepSeek, which eroded power company share prices at the start of the year, would slash Big Tech's power demand.
"It continues to be full speed ahead," said Bill Fehrman, CEO of Ohio-based American Electric Power, which is considering adding $10 billion to its record $54 billion capital expenditure plan through the end of the decade.
After previously little-known DeepSeek drew national attention late last month, Fehrman said data center customers told AEP that they would continue their voracious pursuit of electricity supplies.
Executives with Duke, which is hiking its five-year plan by $10 billion, and Exelon similarly said that technology industry customers assured them there would be no slowing of their development of giant computer warehouses.
"We've not seen any changes in tone," Duke CFO Brian Savoy told Reuters.
U.S. electricity demand is projected to reach record highs this year and in 2026, according to the Energy Information Administration.
In addition to the rise of data centers, manufacturing and the electrification of industries like transportation are also spurring power consumption.
The country's data centers, however, are being built at an unusually large scale.
Data centers, which typically had a capacity of 20 megawatts, are now being constructed at as much as 1,000 megawatts, or 1 gigawatt, at a single site.
That's enough to power all of the homes in a major U.S. city.
PPL said it has 9 gigawatts in advanced stages of development and AEP said it has commitments for another 20 gigawatts of largely data center customers through 2030.
Utility spending is not a sure bet with many utilities needing to have their plans approved by state regulators.
Growing capital plans, which include new electricity generation and transmission lines, generally also lead to rising power bills for everyday homes and business.
It's unclear, however, whether some companies will include special provisions for data centers requiring them to bear more grid-related costs.
Utilities like AEP and Exelon are currently involved in regulatory fights over how to develop power contracts specific to data centers and other very large customers.
Reporting by Laila Kearney in New York, Seher Dareen and Vallari Srivastava in Bengaluru; Editing by Maju Samuel, Nia Williams and David Gregorio
https://www.reuters.com/business/energy ... 025-02-13/
Re: THE ECONOMY
REUTERS
"US retail sales post biggest drop in nearly two years amid winter freeze"
By Lucia Mutikani
February 14, 2025
Summary
* Retail sales drop 0.9% in January
* December sales growth revised up to 0.7% from 0.4%
* Core retail sales fall 0.8%; December revised higher
* Factory production dips 0.1%; motor vehicle output drops 5.2%
WASHINGTON, Feb 14 (Reuters) - U.S. retail sales dropped by the most in nearly two years in January, likely weighed down by frigid temperatures, wildfires and motor vehicle shortages, suggesting a sharp slowdown in economic growth early in the first quarter.
But the larger-than-expected and across the board decline in retail sales reported by the Commerce Department on Friday probably does not reflect a material shift in consumer spending as it also followed four straight months of hefty increases.
A sharp upward revision to December's sales took some of the sting from the report.
Economists also noted that it was difficult to strip out large seasonal swings from the data at the turn of the year, which was also evident in the January consumer inflation report.
They continued to expect the Federal Reserve would not resume cutting interest rates before the second half.
Some of the policies of President Donald Trump's administration, like broad tariffs on imports, have cast a shadow over the economy.
"The drop was dramatic, but several mitigating factors show there's no cause for alarm," said Robert Frick, corporate economist at Navy Federal Credit Union.
Retail sales dropped 0.9% last month, the biggest decrease since March 2023, after an upwardly revised 0.7% increase in December, the Commerce Department's Census Bureau said.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, dipping 0.1%.
Retail sales increased 4.2% year-on-year in January.
Much of the country was blanketed by snowstorms and freezing temperatures last month while wildfires scorched entire neighborhoods in Los Angeles.
"The wildfires in Los Angeles, the second-largest metro area in the U.S., and severe winter weather in other parts of the country, may have limited face-to-face shopping activity," said Jay Hawkins, a senior economist at PNC Financial.
Some economists speculated that rising prices and confusion over tariffs could have impacted sales.
Pre-emptive buying in anticipation of tariffs that would raise prices for goods helped to boost retail sales in recent months.
But consumer sentiment has deteriorated, with one-year inflation expectations hitting a 15-month high in early February as households perceived that "it may be too late to avoid the negative impact of tariff policy," a University of Michigan survey of consumers showed last week.
"Maybe people are getting confused on the tariff story and think they are happening immediately and are therefore not even considering a purchase," said James Knightley, chief international economist at ING.
"We will need to wait until the February data to see if this is the start of a more cautious consumer trend or indeed whether it was simply a weather-related pull back."
A 25% tariff on Mexican and Canadian goods was delayed until March.
An additional 10% levy on goods from China went into effect this month.
Trump this week tasked his economics team with devising plans for reciprocal tariffs on every country that taxes U.S. imports.
Stocks on Wall Street were muted on Friday, while the dollar eased against a basket of currencies and U.S. Treasury yields fell.
FED ON HOLD
The data did little to change the view that the Fed will wait until later in the year to next cut its policy rate.
The U.S. central bank left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range in January, having reduced it by 100 basis points since September, when it embarked on its policy easing cycle.
The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
Within the retail sales figures motor vehicles led the decline, with receipts at auto dealerships dropping 2.8% after advancing 0.9% in December.
In addition to the weather probably keeping buyers from showrooms, shortages could have been a factor.
Other data from the Census Bureau showed retail motor vehicle inventories were depleted in December.
Supply is unlikely to improve, with a third report from the Fed showing motor vehicle production plummeting 5.2% in January.
Sporting goods, hobby, musical instrument and bookstore sales plunged 4.6%.
Online store sales tumbled 1.9%.
Building material store sales fell 1.3%.
There were also sharp declines in sales at furniture, clothing and electronic retailers.
But receipts at food services and drinking places, the only services component in the report, increased 0.9% after edging up 0.1% in December.
Economists view dining out as a key indicator of household finances.
Higher gasoline prices lifted sales at service stations 0.9%.
Spending remains underpinned by labor market resilience, which is keeping wage growth elevated and the economic expansion on track.
Household wealth is at record highs thanks to high house prices, though the stock market has ceded some gains.
Retail sales excluding automobiles, gasoline, building materials and food services declined 0.8% last month after an upwardly revised 0.8% jump in December.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product, and were previously reported to have surged 0.7% in December.
Economists estimated inflation-adjusted consumer spending to have been flat or have posted a small dip in January.
Robust consumer spending offset the drag on GDP from inventories being nearly drawn down in the fourth quarter.
The Atlanta Fed lowered its first quarter GDP growth estimate to a 2.3% annualized rate from a 2.9% pace.
The economy grew at a 2.3% rate last quarter.
"The underlying strength of the economy remains largely unchanged," said Tuan Nguyen, U.S. economist at RSM US.
"If that strength persists, we should expect sales to rebound in the coming months."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Toby Chopra
https://www.reuters.com/markets/us/us-r ... 025-02-14/
"US retail sales post biggest drop in nearly two years amid winter freeze"
By Lucia Mutikani
February 14, 2025
Summary
* Retail sales drop 0.9% in January
* December sales growth revised up to 0.7% from 0.4%
* Core retail sales fall 0.8%; December revised higher
* Factory production dips 0.1%; motor vehicle output drops 5.2%
WASHINGTON, Feb 14 (Reuters) - U.S. retail sales dropped by the most in nearly two years in January, likely weighed down by frigid temperatures, wildfires and motor vehicle shortages, suggesting a sharp slowdown in economic growth early in the first quarter.
But the larger-than-expected and across the board decline in retail sales reported by the Commerce Department on Friday probably does not reflect a material shift in consumer spending as it also followed four straight months of hefty increases.
A sharp upward revision to December's sales took some of the sting from the report.
Economists also noted that it was difficult to strip out large seasonal swings from the data at the turn of the year, which was also evident in the January consumer inflation report.
They continued to expect the Federal Reserve would not resume cutting interest rates before the second half.
Some of the policies of President Donald Trump's administration, like broad tariffs on imports, have cast a shadow over the economy.
"The drop was dramatic, but several mitigating factors show there's no cause for alarm," said Robert Frick, corporate economist at Navy Federal Credit Union.
Retail sales dropped 0.9% last month, the biggest decrease since March 2023, after an upwardly revised 0.7% increase in December, the Commerce Department's Census Bureau said.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, dipping 0.1%.
Retail sales increased 4.2% year-on-year in January.
Much of the country was blanketed by snowstorms and freezing temperatures last month while wildfires scorched entire neighborhoods in Los Angeles.
"The wildfires in Los Angeles, the second-largest metro area in the U.S., and severe winter weather in other parts of the country, may have limited face-to-face shopping activity," said Jay Hawkins, a senior economist at PNC Financial.
Some economists speculated that rising prices and confusion over tariffs could have impacted sales.
Pre-emptive buying in anticipation of tariffs that would raise prices for goods helped to boost retail sales in recent months.
But consumer sentiment has deteriorated, with one-year inflation expectations hitting a 15-month high in early February as households perceived that "it may be too late to avoid the negative impact of tariff policy," a University of Michigan survey of consumers showed last week.
"Maybe people are getting confused on the tariff story and think they are happening immediately and are therefore not even considering a purchase," said James Knightley, chief international economist at ING.
"We will need to wait until the February data to see if this is the start of a more cautious consumer trend or indeed whether it was simply a weather-related pull back."
A 25% tariff on Mexican and Canadian goods was delayed until March.
An additional 10% levy on goods from China went into effect this month.
Trump this week tasked his economics team with devising plans for reciprocal tariffs on every country that taxes U.S. imports.
Stocks on Wall Street were muted on Friday, while the dollar eased against a basket of currencies and U.S. Treasury yields fell.
FED ON HOLD
The data did little to change the view that the Fed will wait until later in the year to next cut its policy rate.
The U.S. central bank left its benchmark overnight interest rate unchanged in the 4.25%-4.50% range in January, having reduced it by 100 basis points since September, when it embarked on its policy easing cycle.
The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.
Within the retail sales figures motor vehicles led the decline, with receipts at auto dealerships dropping 2.8% after advancing 0.9% in December.
In addition to the weather probably keeping buyers from showrooms, shortages could have been a factor.
Other data from the Census Bureau showed retail motor vehicle inventories were depleted in December.
Supply is unlikely to improve, with a third report from the Fed showing motor vehicle production plummeting 5.2% in January.
Sporting goods, hobby, musical instrument and bookstore sales plunged 4.6%.
Online store sales tumbled 1.9%.
Building material store sales fell 1.3%.
There were also sharp declines in sales at furniture, clothing and electronic retailers.
But receipts at food services and drinking places, the only services component in the report, increased 0.9% after edging up 0.1% in December.
Economists view dining out as a key indicator of household finances.
Higher gasoline prices lifted sales at service stations 0.9%.
Spending remains underpinned by labor market resilience, which is keeping wage growth elevated and the economic expansion on track.
Household wealth is at record highs thanks to high house prices, though the stock market has ceded some gains.
Retail sales excluding automobiles, gasoline, building materials and food services declined 0.8% last month after an upwardly revised 0.8% jump in December.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product, and were previously reported to have surged 0.7% in December.
Economists estimated inflation-adjusted consumer spending to have been flat or have posted a small dip in January.
Robust consumer spending offset the drag on GDP from inventories being nearly drawn down in the fourth quarter.
The Atlanta Fed lowered its first quarter GDP growth estimate to a 2.3% annualized rate from a 2.9% pace.
The economy grew at a 2.3% rate last quarter.
"The underlying strength of the economy remains largely unchanged," said Tuan Nguyen, U.S. economist at RSM US.
"If that strength persists, we should expect sales to rebound in the coming months."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Toby Chopra
https://www.reuters.com/markets/us/us-r ... 025-02-14/
Re: THE ECONOMY
REUTERS
"Fed's Logan calls for caution on rate cuts, even if inflation cools"
By Reuters
February 14, 2025
PALM DESERT, California, Feb 14 (Reuters) - Dallas Federal Reserve Bank President Lorie Logan on Friday reiterated her view that even if inflation nears the Fed's 2% goal in coming months, the U.S. central bank should not necessarily reduce short-term borrowing costs in response.
"I think there's a real question about how restrictive monetary policy is right now," Logan said at a banking conference hosted by Southern Methodist University in Palm Desert, California.
"And so I think we need to be cautious."
And, Logan signaled, it remained far from clear if inflation will indeed cool in the near term, noting a pattern in recent years of higher inflation at the start of the year, when companies typically tend to implement price increases.
In January, U.S. consumer inflation rose at the fastest pace in nearly a year and a half, data released this week showed.
In another potential sign of upward inflationary pressures, Logan pointed to bank surveys that reveal a lot of optimism over economic growth and loan demand.
And, she said, the central bank will be watching geopolitics and the still-unclear policies of President Donald Trump's administration.
Meanwhile, the labor market has been strong, with the unemployment rate in January ticking down to 4.1%.
"I think we're in a good position right now to watch the data over the coming months... and taking our time to really go look at the data and see how these potential changes are to evolve," she said.
Logan said she has her eye on the recent rise in long-term borrowing costs, which she attributed to expectations for stronger growth ahead and possibly also to worries about inflation.
For now, she said, she does not see financial conditions broadly as being so tight as to require the Fed to respond by cutting rates.
"That's not where we are right now," Logan said.
"What I'm most focused on is making sure that...inflation is at our 2% target."
Reporting by Ann Saphir; Editing by Leslie Adler and David Gregorio
https://www.reuters.com/markets/us/feds ... 025-02-14/
"Fed's Logan calls for caution on rate cuts, even if inflation cools"
By Reuters
February 14, 2025
PALM DESERT, California, Feb 14 (Reuters) - Dallas Federal Reserve Bank President Lorie Logan on Friday reiterated her view that even if inflation nears the Fed's 2% goal in coming months, the U.S. central bank should not necessarily reduce short-term borrowing costs in response.
"I think there's a real question about how restrictive monetary policy is right now," Logan said at a banking conference hosted by Southern Methodist University in Palm Desert, California.
"And so I think we need to be cautious."
And, Logan signaled, it remained far from clear if inflation will indeed cool in the near term, noting a pattern in recent years of higher inflation at the start of the year, when companies typically tend to implement price increases.
In January, U.S. consumer inflation rose at the fastest pace in nearly a year and a half, data released this week showed.
In another potential sign of upward inflationary pressures, Logan pointed to bank surveys that reveal a lot of optimism over economic growth and loan demand.
And, she said, the central bank will be watching geopolitics and the still-unclear policies of President Donald Trump's administration.
Meanwhile, the labor market has been strong, with the unemployment rate in January ticking down to 4.1%.
"I think we're in a good position right now to watch the data over the coming months... and taking our time to really go look at the data and see how these potential changes are to evolve," she said.
Logan said she has her eye on the recent rise in long-term borrowing costs, which she attributed to expectations for stronger growth ahead and possibly also to worries about inflation.
For now, she said, she does not see financial conditions broadly as being so tight as to require the Fed to respond by cutting rates.
"That's not where we are right now," Logan said.
"What I'm most focused on is making sure that...inflation is at our 2% target."
Reporting by Ann Saphir; Editing by Leslie Adler and David Gregorio
https://www.reuters.com/markets/us/feds ... 025-02-14/
Re: THE ECONOMY
REUTERS
"US manufacturing output falls in January on weak motor vehicle production"
By Reuters
February 14, 2025
WASHINGTON, Feb 14 (Reuters) - U.S. manufacturing production unexpectedly fell in January, weighed down by a sharp decline in motor vehicle output.
Factory output dipped 0.1% last month after a downwardly revised 0.5% rebound in December, the Federal Reserve said on Friday.
Economists polled by Reuters had forecast production edging up 0.1% after a previously reported 0.6% surge.
Production at factories increased 1.0% on a year-on-year basis in January.
Manufacturing, which accounts for 10.3% of the economy, has been recovering as the U.S. central bank started cutting interest rates in September.
But the nascent recovery is threatened by President Donald Trump's protectionist trade policy, which economists have warned would fracture supply chains and create shortages that raise raw material prices.
A 10% additional tariff on Chinese goods was imposed this month while a 25% levy on imports from Canada and Mexico was suspended until March.
A 25% tariff on all steel and aluminum imports goes into effect next month.
Uncertainty over the economic impact of the Trump administration's policies, including tax cuts and mass deportations, has diminished the chances of the Fed resuming rate cuts after pausing in January.
Motor vehicle and parts output plunged 5.2% last month.
Durable manufacturing production was unchanged as the weakness in motor vehicle output offset a 6.0% increase in aerospace and miscellaneous transportation equipment.
This category continues to recover following a crippling strike Boeing factory workers in late 2024.
Nondurable manufacturing production fell 0.3% amid declines in the output of food, beverage and tobacco, printing and support as well as petroleum and coal, and plastics and rubber products.
Mining output dropped 1.2% after rising 2.0% in December.
Utilities production surged 7.2% as freezing temperatures boosted demand for heating.
That followed a 2.9% rebound in December.
Industrial production rose 0.5% last month after surging 1.0% in December.
It advanced 2.0% year-on-year in January.
Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, rose to 77.8% from 77.5% in December.
It is 1.8 percentage points below its 1972–2024 average.
The operating rate for the manufacturing sector slipped 0.1 percentage to 76.3%.
It is 1.9 percentage points below its long-run average.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-m ... 025-02-14/
"US manufacturing output falls in January on weak motor vehicle production"
By Reuters
February 14, 2025
WASHINGTON, Feb 14 (Reuters) - U.S. manufacturing production unexpectedly fell in January, weighed down by a sharp decline in motor vehicle output.
Factory output dipped 0.1% last month after a downwardly revised 0.5% rebound in December, the Federal Reserve said on Friday.
Economists polled by Reuters had forecast production edging up 0.1% after a previously reported 0.6% surge.
Production at factories increased 1.0% on a year-on-year basis in January.
Manufacturing, which accounts for 10.3% of the economy, has been recovering as the U.S. central bank started cutting interest rates in September.
But the nascent recovery is threatened by President Donald Trump's protectionist trade policy, which economists have warned would fracture supply chains and create shortages that raise raw material prices.
A 10% additional tariff on Chinese goods was imposed this month while a 25% levy on imports from Canada and Mexico was suspended until March.
A 25% tariff on all steel and aluminum imports goes into effect next month.
Uncertainty over the economic impact of the Trump administration's policies, including tax cuts and mass deportations, has diminished the chances of the Fed resuming rate cuts after pausing in January.
Motor vehicle and parts output plunged 5.2% last month.
Durable manufacturing production was unchanged as the weakness in motor vehicle output offset a 6.0% increase in aerospace and miscellaneous transportation equipment.
This category continues to recover following a crippling strike Boeing factory workers in late 2024.
Nondurable manufacturing production fell 0.3% amid declines in the output of food, beverage and tobacco, printing and support as well as petroleum and coal, and plastics and rubber products.
Mining output dropped 1.2% after rising 2.0% in December.
Utilities production surged 7.2% as freezing temperatures boosted demand for heating.
That followed a 2.9% rebound in December.
Industrial production rose 0.5% last month after surging 1.0% in December.
It advanced 2.0% year-on-year in January.
Capacity utilization for the industrial sector, a measure of how fully firms are using their resources, rose to 77.8% from 77.5% in December.
It is 1.8 percentage points below its 1972–2024 average.
The operating rate for the manufacturing sector slipped 0.1 percentage to 76.3%.
It is 1.9 percentage points below its long-run average.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-m ... 025-02-14/