BRAZIL: Formal Job Creation Reaches Record 432k In February

The upcoming US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday. 

• Real GDP growth is seen confirming what was at the time a softer than expected 2.3% annualized in Q4, whilst there will also be a first estimate for real GDI growth after 2.1% in Q3.
• Much of the relative GDP weakness in Q4 after two quarters averaging 3.0% came from a large drag from inventories. It should continue to show signs of robust domestic demand after personal consumption increased 4.2% annualized in the advance release (Bloomberg cons 4.1).
• However, January’s monthly report (on Friday) is likely to show consumption got off to a much weaker start of 2025. Recall that retail sales were far weaker than expected in January as they slid -0.9% M/M (cons -0.2) along with an even larger miss for the control group at -0.8% M/M (cons 0.3) to more than unwind the previously strong 0.8% M/M increase in December.
• As such, the Bloomberg consensus sees real personal spending growth of -0.1% M/M in Jan after 0.4% in Dec.
• Further within the details, JPMorgan expect nominal personal income growth of 0.4% M/M (to have been boosted by the 2.5% Cost of Living Adjustment for Social Security, with employee compensation rising 0.3% M/M. That should see real disposable personal income increase 0.1% M/M. 

• Thursday’s Q4 data will also reveal revisions for core PCE inflation estimates (seen at 2.5% after the 2.50% in initial data) although as usual the monthly profile behind those revisions will only be revealed in Friday’s January release.
• Those Q4 revisions will reflect the new seasonal adjustment factors for both CPI and PPI, but longer dated revisions will have to wait for the comprehensive national account revisions due in September.
• As for Friday’s core PCE estimates, Bloomberg consensus points to 0.3% M/M but detailed estimates are centered on the cusp of rounding to 0.2 or 0.3%.  
• Indeed, the analysts in the table below eye an average/median of 0.26% M/M whilst Fed Governor Waller cited around 0.25% M/M.
• It should see core PCE inflation round to 2.6% Y/Y, perhaps aided by modest upward revisions, but it wouldn’t take a large miss to round to 2.5% (unless revisions are particularly firm).
• Either way, it’s set to show progress from the 2.8% Y/Y in December as favorable base effects swing into play.
• Recent run rates should continue to look healthier but not fully back to target, with the three-month possibly easing a tenth to 2.1% annualized and the six-month perhaps firming a tenth to 2.4% (a metric Waller mentioned along with the Y/Y which is seen at 2.6%).  
• In Waller’s words: "These rates are lower than where they stood in January 2024, which is good, but progress has been slower than I expected on reducing inflation to our 2% target".

• Tsy $44B 7Y-Note auction (91282CMR9) is at the top of the hour, WI currently running around 4.210%, 24.7bp rich to last month's stop.
• January auction recap: Tsys futures paring losses (TYH5 currently 108-30.5 last, -6.5) after the $44B 7Y note auction (91282CMC2) stops 0.8bp through with 4.457% high yield vs. WI of 4.465%; bid-to-cover 2.64x vs. 2.76x prior.
• Peripheral stats: Indirect take-up fell back to 67.08% vs. 87.88% in December; Direct take-up rebounded off prior month's record low of 2.84% to 23.06%; Dealers took 9.86% vs. 9.27% prior.
• Timing: The 7Y note results will available shortly after the competitive auction closes at 1300ET.