Evelyn Reynolds

The University of Michigan Survey of Consumers for March posted a reading of 57.9, a 10.5% decline from February and below the Dow Jones consensus estimate for 63.2.
The one-year inflation outlook spiked to 4.9%, the highest reading since November 2022. At the five-year horizon, the outlook jumped to 3.9%, the highest since February 1993.
While the measure is often prone to disparities between parties, survey officials said sentiment slumped across partisan lines along with virtually all demographics.

Consumer sentiment took another hit in March as worries intensified over inflation and a slumping stock market, according to the University of Michigan’s latest sentiment survey released Friday.
The survey posted a mid-month reading of 57.9, which represents a 10.5% decline from February and was below the Dow Jones consensus estimate for 63.2. The reading was 27.1% below a year ago and was the lowest since November 2022.

While the current conditions index fell a less severe 3.3%, the expectations measure for the future was off 15.3% on a monthly basis and 30% from the same period in 2024.
In addition, fears grew over where inflation is headed as President Donald Trump institutes tariffs against U.S. trading partners. New duties on aluminum and steel took effect Wednesday, and the president this week also threatened 200% tariffs on European Union liquor after the EU hit U.S. whiskey and other goods with 50% levies.
The one-year outlook spiked to 4.9%, up 0.6 percentage point from February and the highest reading since November 2022. At the five-year horizon, the outlook jumped to 3.9%, up 0.4 percentage point for the highest level since February 1993.
Stocks largely brushed off the report, holding in positive territory while Treasury yields moved higher.
Though the measure is often prone to disparities between parties, survey officials said sentiment slumped across partisan lines along with virtually all demographics.

“Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences,” Joanne Hsu, the survey’s director, said. “Consumers from all three political affiliations are in agreement that the outlook has weakened since February.”
Expectations fell 10% for Republicans, 24% for Democrats and 12% for independents, Hsu added. Sentiment overall has fallen 22% since December.
The inflation outlook contradicts reports earlier this week showing that consumer prices rose less than expected while wholesale prices were flat in February.
Markets largely expect the Federal Reserve, which aims for a 2% inflation rate, to stay on hold when it concludes its two-day meeting Wednesday. Traders, though, are pricing in 0.75 percentage point of interest rate cuts by the end of the year, starting in June, according to the CME Group’s gauge of futures pricing.
Correction: Joanne Hsu is the survey’s director. An earlier version misspelled her name.

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Men and women socialize at the end of the day outside The Castle Pub in London, United Kingdom.
Robert Nickelsberg | Getty Images News | Getty Images

The U.K.’s economy unexpectedly shrank by 0.1% month-on-month in January, official figures showed on Friday.
Britain’s Office for National Statistics said the fall was mainly due to a contraction in the production sector.

Economists polled by Reuters had expected the country’s GDP to grow by 0.1%.
At 7:35 a.m. in London, shortly after the data release, the British pound was down by around 0.15% against the dollar to trade at $1.293. Sterling was flat against the euro.
Meanwhile, long-term government borrowing costs, which spiked to multi-decade highs earlier this year, rose. The yield on 20-year U.K. government bonds — known as gilts — added 2 basis points, while 30-year gilt yields were up by 4 basis points.
Services output picked up by 0.1% month-on-month in January, but marked a slowdown from the 0.4% hike of December. Production output dropped by 0.9% on the month, after recording a 0.5% rise in the previous month. Monthly construction output meanwhile fell by another 0.2% in January, after also shedding 0.2% in December.
The U.K. economy grew by 0.1% in the fourth quarter, beating expectations, ONS data showed last month. It flatlined in the third quarter.

The monthly GDP data has been checkered since then, with a 0.1% contraction in October, a 0.1% expansion in November and a 0.4% month-on-month expansion in December thanks, to growth in services and production.
Friday’s GDP release will be the last data print before the U.K. Treasury’s “Spring Statement” on March 26, when Chancellor Rachel Reeves presents an update on her plans for the British economy.
The statement is released alongside economic forecasts from the Office for Budget Responsibility, the U.K.’s independent economic and fiscal forecaster, which gives its assessment on the likely impact of the government’s tax and spending plans.
There have been concerns that the Treasury’s fiscal plans, which were laid out last fall and which will increase the tax burden on British businesses, could weigh on investment, jobs and growth. Reeves has defended the tax rises, saying they’re a one-off measure and necessary to boost investment in public services.
The Bank of England made its first interest rate cut of the year in February, signaling further cuts were to come as it halved the U.K.’s growth forecast for 2025 from 1.5% to 0.75%.
Markets are widely expecting the Bank of England to hold rates steady at 4.5% at its Monetary Policy Committee meeting next week, LSEG data showed on Friday.
The central bank said it would judge how to balance the need to boost growth with the inflationary risk posed by U.S. President Donald Trump’s trade tariffs. The U.K. has not been specifically targeted so far, but its exports of steel and aluminum to the U.S. will fall under Trump’s blanket 25% import duties on the metals.
In a note on Friday, Paul Dales, chief U.K. economist at Capital Economics, said the data highlighted the weakness in the British economy before the impact of rising business taxes and geopolitical uncertainty had fully set in.
“Most of the weakness is just payback from the surprisingly strong 0.4% m/m rise in GDP in December,” he said. “In other words, December’s figures made the economy look stronger than it really was and January’s make it look a bit weaker. The truth is probably that the underlying pace of growth is a little bit above zero.”
He added that although U.S. President Donald Trump’s blanket tariffs on steel and aluminum had only come into effect this week, they could already have impacted the U.K. economy.
“The 1.1% m/m fall in manufacturing output was partly due to a 3.3% m/m drop in metals output,” he explained. “It’s possibly related [to tariffs] as they have been anticipated for a while.”
Speaking in parliament on Wednesday, Britain’s Prime Minister Keir Starmer told politicians he was hopeful the U.K. could still evade Trump’s protectionist trade policies.  
“I’m disappointed to see global tariffs in relation to steel and aluminium, but we will take a pragmatic approach,” he said. “We are negotiating an economic deal which covers and will include tariffs if we succeed, but we will keep all options on the table.” More

On the surface, February’s inflation data brought some encouraging news. But underneath, there were signs likely to keep the Fed on hold when it comes to interest rates.
While the consumer and producer price indexes both were lower than market expectations, that won’t necessarily be reflected in the main PCE price index measure the Fed uses to gauge inflation.
“In short, progress on inflation has started off 2025 on the wrong foot,” Bank of America economist Stephen Juneau said in a note.

Watermelons from Mexico are displayed on a shelf at a Target store on March 5, 2025 in Novato, California.
Justin Sullivan | Getty Images

On the surface, February’s inflation data released this week brought some encouraging news. But underneath, there were signs likely to keep the Federal Reserve on hold when it comes to interest rates.
While the consumer and producer price indexes both were lower than anticipated, that won’t necessarily be reflected in the main measure the Fed uses to gauge inflation.

Because of some byzantine math and trends in a few key areas beneath the headline readings, policymakers are unlikely to take a lot of comfort in these numbers, according to multiple Wall Street economists.
“In short, progress on inflation has started off 2025 on the wrong foot,” Bank of America economist Stephen Juneau said in a note. “Our forecast for PCE inflation reinforces our view that inflation is unlikely to fall enough for the Fed to cut this year, especially given policy changes that boost inflation. We maintain our view that policy rates will stay on hold through year-end unless activity data really weakens.”
Markets agree, at least for now. Traders are assigning virtually no probability of a cut at next week’s Federal Open Market Committee meeting and only about a 1-in-4 chance of a reduction in May, according to CME Group calculations.

While the Fed pays attention to the two Bureau of Labor Statistics gauges, it considers the last word on inflation to be the Commerce Department’s personal consumption expenditures price index.
Central bank officials believe the PCE reading — in particular the core that excludes food and energy prices — to be a broader look at price trends. The index also more closely reflects what consumers are buying rather than just the prices of individual goods and services. If consumers are, say, substituting chicken for beef, that would be more indicated in the PCE rather than the CPI or PPI.

Most economists think the latest PCE reading, scheduled for release later this month, will show the year-over-year inflation rate at best holding steady at 2.6% or perhaps even ticking up a notch — further away from the Fed’s 2% goal.
Specifically, Thursday’s PPI report, which measures wholesale costs and is thus considered an indicator of pipeline inflation, “confirms our fears that the benign February inflation print would map across to a hotter than expected inflation print on the Fed’s preferred PCE inflation gauge,” wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI.
“Rather than decline steadily through early [second quarter], PCE inflation looks instead set to be bumpy and choppy,” he added.
Some of the areas that will feed through from the PPI and elevate the PCE include higher prices for hospital care as well as insurance prices and air transportation, according to Sam Tombs, chief U.S. economist at Pantheon Macroeconomics.
“The outturn almost certainly will make the Fed wince,” Combs wrote.
Combs predicts the core PCE reading for February will show an inflation rate of 2.8%, a 0.2 percentage point increase from January. That’s about in line with others on the Street, as Bank of America and Citigroup see the core inflation rate at 2.7%. Either way, it’s moving in the wrong direction. The consumer price index showed a core inflation rate of 3.1%, the lowest since April 2021.
However, there could be some good news yet.
As much as the expectation is for a bounce from February, many forecasters see inflation pulling back beyond that, even with the impact from tariffs.
Citi thinks March will see a “much more favorable” reading, with the firm predicting an out-of-consensus call of the Fed resuming its rate cuts in May. Market pricing currently indicates a much greater likelihood of a June cut.

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The comments come after Bessent said Friday that the U.S. would undergo a transition period as the federal government tries to cut spending, including laying off public sector workers.
Bessent on Thursday reiterated his view that current levels of government spending are “unsustainable.”

Treasury Secretary Scott Bessent said Thursday that his previous comments about a “detox period” for the U.S. economy did not mean that a recession was necessary.
“Not at all. Doesn’t have to be, because it will depend on how quickly the baton gets handed off. Our goal is to have a smooth transition,” Bessent said on CNBC’s “Squawk on the Street.”

The comments come after Bessent said Friday that the U.S. would undergo a transition period as the federal government tries to cut spending, including laying off public sector workers. Bessent on Thursday reiterated his view that current levels of government spending are “unsustainable.”
“We have excess employment in the government, and those people can be moved to the private sector,” Bessent said.
The Treasury head’s comments last week came as several recent economic indicators have pointed to weakening growth. Job growth was slower than expected in February, and surveys of consumers and small business have shown a decline in confidence.
The stock market has also struggled in recent weeks, with the S&P 500 down 6% in March.

Stock chart icon

SPX in March

The federal spending cuts are not the only policy changes that President Donald Trump’s administration is pushing. The White House has also increased tariffs on major U.S. trading partners, and a deal to extend existing tax cuts is expected to be a key part of political negotiations later this year.
“There’s two parts to this: It’s accelerating the economy, growing the revenue base — and controlling expenses. In the U.S., we do not have a revenue problem, we have a spending problem,” Bessent said Thursday. More

Treasury Secretary Scott Bessent said Thursday the administration is more focused on the long-term health of the economy and markets and not short-term gyrations.
While Bessent said the administration is attentive to market moves, he predicted that both the real economy and markets would prosper over time.

Treasury Secretary Scott Bessent said Thursday the Trump administration is more focused on the long-term health of the economy and markets and not short-term gyrations.
“We’re focused on the real economy. Can we create an environment where there are long-term gains in the market and long-term gains for the American people?” Bessent said on CNBC’s “Squawk on the Street.” “I’m not concerned about a little bit of volatility over three weeks.”

The comments come with markets in a state of turmoil largely centered on President Donald Trump’s near-daily moves on tariffs against major U.S. trading partners such as Canada, Mexico and China. Major averages have moved toward correction territory, as the Dow Jones Industrial Average has lost more than 7% over the past month.
While Bessent said the administration is attentive to market moves, he predicted that both the real economy and markets would prosper over time.
“The reason stocks are a safe and great investment is because you’re looking over the long term. If you start looking at micro horizons, stocks become very risky. So we are focused over the medium-, long-term,” he said in the interview with CNBC’s Sara Eisen. “I can tell you that if we put proper policies in place, it’s going to lay the groundwork for a both real income gains and job gains and continued asset gains.”
Stocks again were volatile in morning trade, with the averages around even as Bessent spoke.
Earlier in the morning, the Bureau of Labor Statistics reported that wholesale inflation was flat in February, well below Wall Street expectations for a 0.3% increase. That followed a report Wednesday indicating that the consumer price rate had nudged lower as well, providing some welcome news amid concerns that the Trump tariffs would aggravate inflation.
“Maybe the inflation is getting under control and the market is going to have some confidence in that,” Bessent said.

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