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A Big Week Of Macro Data

A Big Week Of Macro Data

The Macro Institute's Weekly Economic Primer

The Macro Institute
March 03, 2025

There is a lot of consequential data coming out this week. The February update to the ISM Manufacturing Index will be released today at 10 am and the ISM Services Index will be out Wednesday. We are curious to see how the inflation proxy in these surveys (Prices Paid) comes in. Prices Paid was higher in almost every regional PMI last month suggesting that inflationary pressures are beginning to build again.

The two national PMIs will also give us some sense of employment prospects. The employment components of the ISM series have been in recovery mode for several months, but not long enough to have an impact on the February payroll figures set to be released on Friday. The chart here shows the relationship between these two data sets and argues that payrolls could be on the weaker side this month before it starts to improve. We shall see.

The Macro Week In Review

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The Macro Week Ahead

The Taming Of Animal Spirits?:

Wall Street was abuzz last week with talk of a “growth scare.” This reflected a notable slowdown in retail and wholesale sector data since the start of the month. The key takeaway should be that many high-frequency macroeconomic indicators surged immediately following the election, and this so-called “scare” largely represents a normalization.

The Conference Board’s Consumer Confidence survey fell sharply, coming in at 98.3 for February compared to 105.3 in January. This index had spiked in the aftermath of the election but has since retreated to late-2024 levels. Political polarization plays a critical role here. Sentiment among Democrats has declined significantly from January, while Republicans' confidence remained steady. That said, a similar trend emerged in the Dallas Fed Manufacturing Survey, which dropped from 13.1 in January to -8.3 in February, effectively returning to pre-election levels.

Persistent inflation remains a key concern. On the consumer side, Core PCE remains elevated at 2.6% year-over-year, while the USDA projects a 3.4% rise in food prices for 2025. On the producer side, various regional PMI surveys showed a sharp uptick in prices paid for inputs in February, likely due to pre-buying activity ahead of anticipated tariffs. These dynamics are playing out in an economy with little spare capacity thus amplifying inflationary risks.

Round 1 Of March Madness: A Pivotal Week For Macro Data:

This week’s flood of economic data could prove consequential ahead of the March 19^th Fed meeting, where markets widely expect the Fed to hold rates steady before potentially cutting in June.

The week kicks off on Monday with the ISM Manufacturing Index, set for release at 10:00 am, with consensus expectations at 50.5 (down from 50.9 in January). Notably, both the New Orders and Prices Paid components spiked to around 55 last month signaling continued economic expansion. Sustained prints in the mid-to-high 50s would likely be needed before the Fed responds to stronger leading indicators.

On Wednesday, attention shifts to the ISM Services Index. It’s projected at 53 for February - matching last month’s level. The prices component, which registered 64.0 in December and 60.4 in January, underscores ongoing inflationary dynamics.

Labor market trends from these ISM surveys will provide further directional guidance ahead of key employment reports later in the week. The ADP Employment Report, also released Wednesday, will offer insight into private-sector job trends. In January, ADP Chief Economist Nela Richardson noted a bifurcation in the labor market, where consumer-facing industries drove hiring and job growth lagged in business services and production.

The week culminates on Friday with the Nonfarm Payrolls (NFP) report and the unemployment rate. The consensus forecast sees unemployment holding steady at 4.0%, down from 4.2% in September 2024. While NFP data is often subject to large revisions and volatility, equity markets closely watch the headline payrolls figure as a key gauge of job creation momentum. The target number to beat is 160K, up from 143K last month.

We’ll continue monitoring these developments as we head into spring and keep you informed on how the data evolves.

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