FED: Beige Book: Economic Outlook "Worsened Considerably" In Several Districts
April's Beige Book portrayed an economy in which economic activity was relatively little changed from the previous edition in February, but with increasing uncertainty over government policy causing businesses' outlooks to deteriorate. Likewise, inflation pressures were seen as little changed (still "modest" / "moderate" for the most part) vs prior, but the outlook is for increasing upside to input prices albeit with questionable ability to pass them through to buyers.
Economic Activity: "Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports. Just five Districts saw slight growth, three Districts noted activity was relatively unchanged, and the remaining four Districts reported slight to modest declines...The outlook in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose."
- Prior edition (Feb): "Overall economic activity rose slightly since mid-January. Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions."
On a district-by-district Fed basis, the Beige Book anecdotes suggest that even for those regions posting growth, businesses' outlooks had deteriorated significantly. Below are the 12 regional Feds sorted by categories of economic activity, plus any notable commentary:
- Increased slightly (5 districts): Atlanta, Boston ("the outlook became more pessimistic on tariff-related concerns"), Richmond ("grew slightly...despite some pockets of weakness tied to federal staffing and contract spending"), Kansas City ("but expectations about business activity and consumer spending weakened considerably"), Dallas ("slowed to a slight pace...Outlooks deteriorated as heightened uncertainty surrounding domestic and trade policy hindered firms' ability to plan").
- Contracted modestly/"lower" (4): New York ("heightened uncertainty weighed on businesses and consumers"), Philadelphia ("sentiment fell, and firms grew less optimistic about future growth amid rising economic uncertainty"), Minneapolis, San Francisco ("slowed slightly...the economic outlook worsened materially").
- Flat/unchanged/little changed (3): Chicago, Cleveland ("contacts expected activity to remain flat in the months ahead"), St Louis ("the outlook has slightly deteriorated. ...Contacts expressed a lot of uncertainty and an elevated effort in estimating the impact of tariffs and ways to reduce cost increases and supply disruptions")
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MNI EXCLUSIVE: Canadian Manufacturing Group President On US Tariff Impact
MNI interviews head of Canadian manufacturing group on tariff wars in podcast -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
FED: Atlanta's Bostic Sees One Less 2025 Rate Cut Amid Slow Inflation Progress
Atlanta Fed Pres Bostic (non-2025 FOMC voter, leans hawk) says in a Bloomberg interview that he has reduced his 2025 rate cut expectations to 1 in March's economic projections versus 2 previously, "because I think we will see inflation be very bumpy", and delayed inflation progress warranted pushing back the path to neutral rates. This puts him among the 8 most hawkish FOMC members for 2025 (of 19 participants, 4 saw 1 cut, 4 saw none). We'd pointed out last week that Bostic may have taken a slightly more hawkish outlook after the Atlanta Fed's Business Inflation Expectations (BIE) survey for March showed a pickup in inflation expectations.
- His projection of inflation this year is "pretty much sideways", won't get back to 2% until 2027.
- Bostic: Undoubtedly hearing more concerns about the trajectory of the economy. The question we face now is, is consumer sentiment going to be a leading indicator like it was pre-pandemic, or will it not translate into actual behavior in the economy which is how it played out for most of the pandemic?
- He cites the Atlanta Fed BIE: looking at expected price changes, the amount of changes they expect almost match the cost of change one-to-one and we will see what happens in terms of whether customers take that on board.
- Bostic says that he's undoubtedly hearing more concerns about the trajectory of the economy. But we still see a reslient economy. The question we face now is, is consumer sentiment going to be a leading indicator like it was pre-pandemic, or will it not translate into actual behavior in the economy, which is how it played out for most of the pandemic?
- Bostic says "we have heard consistently" from businesses that pricing pressures will go higher rather than lower. At the same time, businesses are "quite bullish on sales rising as well" which suggests they believe consumers will be able to manage higher inflation - and their expected input prices match their expected charging prices almost one-to-one. Says we will see what happens in terms of whether customers take that on board.
- Says he tries not to use "that word" (transitory) about inflation: there is "a question" about whether tariffs will generate a one-off jump in inflation or otherwise. Depends on what tariffs we see and "interesting" to see how customers take them on board.
- Re the Atlanta Fed's GDPNow's negative Q1 forecast: it's a sign that the data that have come in suggests a slowdown, but most businesses I'm talking to are not reporting that kind of slowdown - we will have to wait to see what happens.
- On the QT taper decision: His preference is to "stay at this rate ($5B/Month) for a while until we decide to stop". He says that he would think about selling MBS.
PIPELINE: Nearly$25B Corporate Bonds to Price Monday
$24.8B Corporate bonds ti price Monday:
- Date $MM Issuer (Priced *, Launch #)
- 03/24 $3.5B #T-Mobile $1.25B 7Y +93, $1B 10Y +98, $1.25B 30Y +123
- 03/24 $3B #RBC $1B 3NC2 +68, $600M 3NC2 SOFR+82, $1B 6NC2 +88, $400M 6NC2 SOFR+113
- 03/24 $3B #Glencore $500M 1.5Y SOFR+75, $550M 3Y +90, $750M 5Y +110, $1.2B 10Y +135
- 03/24 $3B #Hyundail $800M 2Y +85, $650M 2Y SOFR+99, $750M 5Y +110, $450M 5Y SOFR+135, $350M 7Y +122
- 03/24 $2.25B #Verizon 10Y +95
- 03/24 $1.8B #CIBC $1.4B 4NC3 +85, $400M 4NC3 SOFR+103
- 03/24 $1.5B #RELX Capital $750M 5Y +75, $750M 10Y +95
- 03/24 $1B *Korea National Oil $300M 3Y +70, $400M 3Y SOFR+90, $300M 5Y +105
- 03/24 $900M #Harbour Energy 10Y +200
- 03/24 $850M #Avalon Holdings 5Y +138
- 03/24 $850M #San Diego Gas & Electric 10Y +110
- 03/24 $750M #Equitable Financial Life 5Y +95
- 03/24 $750M #Swiss Re 21NC20 +150
- 03/24 $650M #Macquarie Airfinance 3Y +120
- 03/24 $500M #Marubeni 10Y +105
- 03/24 $500M #SMBC Aviation Cap 5Y +103
- Expected Tuesday:
- 03/25 $1b MuniFin WNG 5Y SOFR+49a
- 03/25 $1B IDB 5Y SOFR+50a
- 03/25 $Benchmark NWB 3Y SOFR+38a
- 03/25 $Benchmark JFM 5Y SOFR+68
