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Contact Mace News President
Tony Mace tony@macenews.com 
to find a customer- and markets-oriented brand of news coverage with a level of individualized service unique to the industry. A market participant told us he believes he has his own White House correspondent as Mace News provides breaking news and/or audio feeds, stories, savvy analysis, photos and headlines delivered how you want them. And more. And this is important because you won’t get it anywhere else. That’s MICRONEWS. We know how important to you are the short advisories on what’s coming up, whether briefings, statements, unexpected changes in schedules and calendars and anything else that piques our interest.

No matter the area being covered, the reporter is always only a telephone call or message away. We check with you frequently to see how we can improve. Have a question, need to be briefed via video or audio-only on a topic’s state of play, keep us on speed dial. See the list of interest areas we cover elsewhere
on this site.

You can have two weeks reduced price no-obligation trial for $199. No self-renewing contracts. Suspend, renew coverage at any time. Stay with a topic like trade while it’s hot and suspend coverage or switch coverage areas when it’s not. We serve customers one by one, 24/7.

Tony Mace was the top editorial executive for Market News
International for two decades. 

Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years. 

Similar experience undergirds our service in Ottawa, London, Brussels and in Asia. 

CONTRIBUTORS

Picture of Tony Mace

Tony Mace

President
Mace News

Picture of Denny Gulino

Denny Gulino

D.C. Bureau Chief
Mace News

Picture of Steven Beckner

Steven Beckner

Federal Reserve
Mace News

Picture of Vicki Schmelzer

Vicki Schmelzer

Reporter and expert on the currency market.
Mace News

Picture of Suzanne Cosgrove

Suzanne Cosgrove

Reporter and expert on derivatives and fixed income markets.
Mace News

Picture of Laurie Laird

Laurie Laird

Financial Journalist
Mace News

Picture of Max Sato

Max Sato

Reporter, economic and political news.
Japan and Canada
Mace News

FRONT PAGE

Preview: Japan’s Wobbly 3rd Straight Economic Growth Seen Intact in Revised Q4 GDP Data but Sluggish Consumption, Exports Point to Flat Q1 Performance

By Max Sato

(MaceNews) – Lukewarm economic growth lingered during much of 2024 in Japan after three quarters of drops but consumption is chilled by high living costs and the outlook for the world’s top two economies is clouded by Trump tariffs, pointing to a flat performance in the first quarter of 2025, with the risk of a slight contraction.

Japan’s economic growth pickup to 0.7% on quarter, or an annualized 2.8%, in the October-December period from +0.4% q/q (+1.7% annualized) in July-September is forecast to show no or only a limited revision in the second reading.

The Cabinet Office will release revised GDP data for the final quarter of 2024 at 0850 JST on Tuesday, March 11 (2350 GMT/1950 EST Monday, March 10). The median projection of Q4 GDP growth by 10 economists in a Mace News poll is 0.7% (forecasts range from 0.5% to 0.8%), or an annualized 2.8% (2.2% to 3.0%).

The preliminary Q4 GDP data released last month showed the much stronger-than-expected growth was largely due to a technical rebound in net exports, up 0.7 percentage point (after four quarters of drops), that was caused by a sharper-than-expected slump in imports and masks weak exports. Domestic demand trimmed total domestic output by 0.1 point in Q4 after boosting the Q3 GDP by 0.5 point, underscoring the wobbly recovery.

The contributions from both domestic and external demand are seen unrevised. The rebound in business investment in equipment after a Q3 drop is forecast to be revised down to +0.3% q/q from the initial reading of +0.5% while the second straight quarterly drop in public works spending is seen revised up slightly to -0.2% q/q from -0.3%.

China is struggling to recover from the property market slump and demand for Japanese vehicles and construction machinery in the U.S. market is fading under the weight of high borrowing costs. Private consumption rose slightly instead of an expected slip, but remains sluggish amid high costs and depressed real wage growth.

In Q3, an unexpected slip in external demand amid sagging Chinese demand and global uncertainties was offset by surprisingly solid consumer spending on vehicles amid high costs for necessities and stormy weather. The Q4 performance more or less matched the 0.7% (annualized 3.0%) growth in Q2. Earlier, the economy suffered three consecutive contractions, shrinking 0.5% (-1.9%) in January-March 2024, 0.1% (-0.3%) in October-December and 0.9% (-3.6%) July-September 2023.

Looking ahead, Japan’s economic growth in the January-March quarter is expected to be at a standstill, posting near-zero growth or a slight contraction, as soaring prices of food and other necessities are hurting consumers at a time when real wages are set to slip back into year-on-year declines. Net exports (exports minus imports) are also expected to be dragged down by slowing U.S. demand and struggling Chinese recovery.

There remains strong demand to upgrade factories and offices among many industries but lingering labor shortages and high construction costs are hampering  smooth implementation of capital investment. Growing uncertainties over the health of the U.S. economy and global trade could also slow capex.

President Donald Trump on Thursday suspended new tariffs on most imports from Canada and Mexico until April 2, two days after he imposed stiff 25% levies on two of the world’s largest economy’s closest partners (10% for Canadian energy). Trump has doubled the import duties that he slapped last month on Chinese products to 20%.

From a year earlier, Japan’s GDP posted a second straight increase in the final quarter of 2024, up 1.2%, after rising 0.6% in Q3 and falling 0.8% in Q2. It is expected to be revised up slightly to a 1.3% rise.

Consensus forecasts for key components in percentage change on quarter except for private inventories and net exports, whose contributions are in percentage points. Preliminary figures are in parentheses.

GDP q/q +0.7% (+0.7%), 3rd straight growth
GDP annualized: +2.8% (+2.8%); 3rd straight growth
GDP y/y: +1.3% (+1.2%); 2nd straight rise
Domestic demand: -0.1 point (-0.1 point); 1st drop in 3 qtrs
Private consumption: +0.1% (+0.1%); 3rd straight rise
Business investment: +0.3% (+0.5%); 1st rise in 2 qtrs
Public investment: -0.2% (-0.3%); 2nd straight drop
Private inventories: -0.2 point (-0.2 point)
Net exports (external demand): +0.7 point (+0.7 point)

Powell Repeats Economy ‘In Good Place’: FOMC Needn’t Be in Hurry To Ease

– Largely Brushes Off Signs of Softening, Uncertainty For Now

– Economy Doesn’t Need Fed to Do Anything: ‘We Can And We Should Wait’

– Other Fed Officials Sounding More Concerned About Economic Outlook

By Steven K. Beckner

(MaceNews) –  Federal Reserve Chairman Jerome Powell continued Friday to say that the Fed need not be “in a hurry” to cut interest rates, given “solid” economic and labor market conditions, even as some of his colleagues hinted at greater concern about the outlook.

Speaking after the Labor Department released a mildly disappointing February employment report, Powell remained positive in remarks to the University of Chicago Booth School of Business’s annual Monetary Policy Forum.

Powell did point to greater uncertainty surrounding trade and other policies of the fledgling Trump administration, but said for now the economy is “in a good place,” with inflation headed toward the Fed’s 2% target and labor markets near full employment.

Despite increased uncertainties, he said “the costs of being cautious are very, very low.”

“We can wait, and we should wait,” added Powell, who was speaking two weeks before the Fed’s rate-setting Federal Open Market Committee meets to take stock of economic and financial conditions and adjust its monetary policy settings.

At its late January meeting, the FOMC left the key federal funds rate unchanged in a target range of 4.25% to 4.5% after cutting it by 100 basis points at the last three meetings of 2024.

Following that meeting, Powell said the FOMC was in “no hurry” to cut rates, given that inflation was still “elevated” and the labor market remained “solid.” He repeated that message in two days of testimony on the Fed’s semi-annual Monetary Policy Report to Congress last month. A host of other Fed officials echoed this cautious approach over the past month.

That patient mood may be starting to shift, however. In their most recent remarks, Fed officials have begun to sound somewhat less single-minded about inflation reduction, even as Wall Street has become more hopeful about multiple 2025 rate cuts.

Slower consumer spending and economic activity, together with concern about tariff impositions on major U.S. trading partners, have increased speculation that the Fed might resume cutting rates. So did a January downtick in the price index for personal consumption expenditures (PCE), the Fed’s preferred inflation gauge, although relief over PCE disinflation has been tempered by increases in some measures of inflation expectations.

The negative inversion of the Atlanta Federal Reserve Bank’s first quarter GDPNow growth forecast raised some eyebrows as well. Nor can policymakers ignore the tightening of financial conditions in the equity market that have accompanied the brewing trade war.

It is also known Fed officials are paying increasing attention to signs of softening in the labor market. Friday morning’s employment report showed non-farm payrolls growing by 151,000 – less than expected, though not dramatically so. January payrolls were revised down significantly to 125,000. The unemployment rate ticked up a tenth to 4.1%, while labor force participation declined from 62.6% to 62.4%. Average hourly earnings gains also slowed from 4.1% to 4.0% year-over-year.

So far, though, the Fed chairman is not noticeably changing his tune. In his Monetary Policy Forum speech, Powell reiterated the same points he made after the FOMC and in congressional testimony.

“Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place,” he said. “The labor market is solid, and inflation has moved closer to our 2% longer-run goal.”

Powell said “the economy has been growing at a solid pace,” noting that “GDP expanded at a 2.3% annual rate in the fourth quarter of last year, extending a period of consistent growth that has been supported by resilient consumer spending.”

He acknowledged that “recent indicators point to a possible moderation in consumer spending” and that “recent surveys of households and businesses point to heightened uncertainty about the economic outlook.”

But Powell was not ready to prejudge. “It remains to be seen how these developments might affect future spending and investment. Sentiment readings have not been a good predictor of consumption growth in recent years.”

He added that the Fed will “continue to carefully monitor a variety of indicators of household and business spending.”

Despite a slower pace of job gains and a rise in unemployment in February, Powell called the labor market “solid and broadly in balance.”

Referring to the Labor Department report, he commented, “Smoothing over the month-to-month volatility, since September, employers have added a solid 191,000 jobs a month on average. The unemployment rate remains low and has held in a narrow range between 3.9 and 4.2 percent for the past year.”

Powell added, “With wage growth moderating and labor supply and demand having moved into better balance, the labor market is not a significant source of inflationary pressure.”

Regarding inflation, Powell observed that “recent readings remain somewhat above our 2% objective,” and “the path to sustainably returning inflation to our target has been bumpy, and we expect that to continue.”

Powell also acknowledged increases in some inflation expectation gauges, but said “most measures of longer-term expectations remain stable and consistent with our 2 percent inflation goal.”

Powell said the economy, and in turn monetary policy, could be affected not just by trade policies, but also fiscal policy, regulatory policies and policies on immigration.

“As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves,” he said.

Against that backdrop, Powell declared, “We do not need to be in a hurry, and are well positioned to wait for greater clarity.”

He made much the same point in response to a question about how the FOMC should make monetary policy in face of heightened uncertainty. “Right now … the costs of being cautious are very, very low. The economy is fine. It doesn’t need for us to do anything … . We can wait and we should wait.”

But some of Powell’s fellow policymakers have been sounding more anxious about the outlook this week. Nascent fissures in the economy’s strong facade have begun to affect Fed rhetoric.

Preceding Powell at the same Forum Friday morning, Fed Governor Michelle Bowman (not usually known for dovish sentiments) said, “although the FOMC has been focused on lowering inflation in the past few years, as we continue to make progress on approaching our 2% target, I expect that the labor market and economic activity will become a larger factor in the FOMC’s policy discussions.”

Also Friday morning, Governor Adriana Kugler said she “sees the U.S. labor market as having substantially rebalanced, and conditions have stabilized at a level that I believe is close to the FOMC’s goal of maximum employment. Still, I am closely monitoring any signs of changes in the labor market so that we can keep it in the good place that it is now while bringing down inflation to our target.”

The previous day, Governor Christopher Waller all but ruled out a rate cut at the FOMC’s March 18-19 meeting on Thursday, but strongly suggested economic cooling and further disinflation could well justify at least one cut at subsequent meetings.

After pointing to signs of softness, he said he wants to wait to see if weakness shows up in broader economic statistics. “I want to see what happens with the February inflation data. I want to see a little bit more with what happens with tariff policies” before deciding when to cut rates.

Earlier Thursday, Philadelphia Fed President Patrick Harker also sent up warning flares. “Unemployment still low, (and we’re) still getting growth, but there are threats to this,” he said. “We’re starting to see that confidence is starting to wane.”

On Monday, St. Louis Fed President Alberto Musalem, usually thought of as relatively “hawkish,” said he “would become concerned if we begin to see more evidence of a consumer pullback or a dampening of business confidence and investment plans.” He added that “the recent uptick in initial claims for unemployment insurance bears watching.”

But the voting St. Louis Fed chief didn’t fully retreat from inflation concerns. Ensuring that it “converges to target” with “the labor market remaining near full employment … requires that monetary policy remains modestly restrictive until inflation convergence is assured,” he said, adding that risks to inflation are “skewed to the upside” and describing risks to inflation expectations as “elevated.” 

Musalem said a quicker than expected decline in inflation “would provide more confidence for reducing the policy rate toward neutral,” but warned, “a different monetary policy response could be appropriate if above-target inflation is sustained, or longer-term inflation expectations rise. In that case, a more restrictive monetary policy than the baseline path might be appropriate.”

On the other hand, New York Fed President John Williams, the FOMC Vice Chairman, said Tuesday that monetary policy is “in a good place” and said, “I don’t see any need to change it.”

ISM: US Services Sector Expands for 8th Straight Month in February While Concerns Over Trump Tariffs Darken Outlook

–ISM Services Index at 53.5 in February Vs. 52.8 in January, Above Median Forecast 52.7
–ISM’s Miller: Services PMI Has Been Trending Down but More Stable Now, Points to Sustained Growth on Year
–Miller:
Jump in ISM February Manufacturing Prices Paid Index Amid Higher Commodities Markets Not Yet Feeding Through to Services Prices

By Max Sato

(MaceNews) – The U.S. services sector expanded for the eighth straight month in February, led by news orders and employment growth, but many firms expressed concerns over the drag from Trump tariffs on imports from close trading partners that are set to jack up costs and hamper business planning, data from the Institute for Supply Management showed Wednesday.

The ISM index, which shows the directional change of economic activity, rose 0.7 percentage points to 53.5, above its 12-month moving average of 52.5, after slipping 1.2 points to 52.8 at the start of the year. It was firmer than the consensus forecast of 52.7.

“February was the third month in a row with all four subindexes that directly factor into the services PMI – business activity, new orders, employment and supplier Deliveries – in expansion territory, the first time this has happened since May 2022,” Steve Miller, chair of the ISM Services Business Survey Committee, said in a statement. “Slightly slower growth in the business activity index was more than offset by growth in the other three subindexes.”

At the same time, he warned about lingering concerns over the impact of the stiff 25% tariffs on imports from Canada and Mexico (10% for Canadian energy) that took into effect on Tuesday. President Donald Trump has doubled the import duties that he slapped last month on Chinese products to 20%

Miller noted that some respondents indicated that federal spending cuts are also having negative impacts on their business forecasts.

A construction company told the ISM that tariffs will have a significant cost impact to its projects. “The majority of the capital equipment we purchase is not manufactured in the U.S., or components that make the equipment come from overseas manufacturers,” it said. “We are also seeing U.S. prices already rise in anticipation, which is a similar reaction of the U.S. suppliers when the previous tariffs were introduced.”

“Business seemed to pop after the (presidential) election, but uncertainty after the election seemed to take the wind out of our sails, with uncertainty again increasing,” said a firm in the professional, scientific and technical services category.

Miller told reporters that “there were relatively few comments on tariffs that are actually going into price increases other than the ones that were implemented on China on metal products in February.”

“Other than that, it was really uncertainty,” he said. “The favorite word right now seems to be ‘chaos,’ so that was mentioned several times, and general commentary around uncertainty of business forecast and how badly that will impact both inbound costs and customer demand.”

He noted that the 7.5-point surge to 62.4 in the ISM manufacturing prices paid index seen earlier this week was due to higher commodities markets, and that it is not yet feeding through to the prices of materials and labor paid by the services sector.

Asked about the ISM services employment subindex’s solid 1.6-point rise to 53.9 in February, which is the highest in more than three years (since 54.6 in December 2021), Miller replied that it is “pretty balanced” as the number of industries that reported increases in February was the same as that of those showing decreases.

Miller said he was surprised by the ADP national employment report released Wednesday that showed an increase of 77,000 in private payrolls in February, well below the consensus of a 162,000 rise.

The 12-month moving averages in both the ISM’s overall PMI and employment subindex have been generally trending downward in recent months but Miller noted that the overall PMI reading is “more stable” now and points to “sustained growth year over year, which is a real positive sign.”

The latest 12-month “lookback” (backward) moving average in the ISM services PMI exceeded the prior 12-month moving average, Miller said. In February 2025, the 12-month moving average stood at 52.5, just above 52.4, which was the average between January 2023 and February 2024. The last time the most recent moving average was above the previous 12-month average was in July 2022, when the 12-month lookback average was 60.1, compared to 59.5, the average between August 2020 and July 2021.

Sal Guatieri, senior economist at BMO Capital Markets Economics, described the employment index as a “bright spot” in the ISM report. “Still, we are comfortable with our call for a modest further slowing in nonfarm payroll growth to 135,000 in February, due Friday, which could nudge the jobless rate higher.” The median economist forecast in a Mace News survey is a 160,000 increase.

“The Fed faces a tricky balancing act in the months ahead as the economy will likely lose momentum and inflation creep higher in response to new tariffs,” Guatieri wrote in a report. “The wisest option is to sit tight.” The Federal Open Market Committee is expected to pause in rate cuts at its March 18-19 meeting, holding the maintain the target range for the federal funds rate in a range of 4.25% to 4.50%.

Of the four sub-indexes that directly factor into the services PMI, the business activity/production index registered 54.4 in February, 0.1 percentage point lower than the 54.5 recorded in January but it is also the 57th consecutive month of expansion. The new orders index stood at 52.2, up 0.9 point from 51.3 in January. The index was in expansion for the eighth consecutive month after contracting in June for just the second time since May 2020.

The employment index was in growth territory for the fifth straight month, rising 1.6 points 53.9. Seven of the 14 industries, led by real estate, reported employment gains while the other 14 including retail saw drops.

The supplier deliveries index – the only ISM index that is inversed – edged up 0.4 point to 53.4, indicating slower supplier performance for the third month in a row. Comments from respondents include: “Due to weather events and staffing issues with distributors, some deliveries have been delayed” and “Noted delays were supply chain issues like surges in demand anticipating tariff impact.”

Among other subindexes, the prices paid index was at 62.6, up 2.2 points from 60.4 the previous month. The February reading is the 28th in a row below 70, though it is, for the first time since March 2023, a third consecutive month above 60.

MORE NEWS

CONTACT US/SALES

President, Mace News:

tony@macenews.com


Washington Bureau Chief:

denny@macenews.com


SUBSCRIPTIONS

Contact Mace News President
Tony Mace tony@macenews.com 
to find a customer- and markets-oriented brand of news coverage with a level of individualized service unique to the industry. A market participant told us he believes he has his own White House correspondent as Mace News provides breaking news and/or audio feeds, stories, savvy analysis, photos and headlines delivered how you want them. And more. And this is important because you won’t get it anywhere else. That’s MICRONEWS. We know how important to you are the short advisories on what’s coming up, whether briefings, statements, unexpected changes in schedules and calendars and anything else that piques our interest.

No matter the area being covered, the reporter is always only a telephone call or message away. We check with you frequently to see how we can improve. Have a question, need to be briefed via video or audio-only on a topic’s state of play, keep us on speed dial. See the list of interest areas we cover elsewhere
on this site.

You can have two weeks reduced price no-obligation trial for $199. No self-renewing contracts. Suspend, renew coverage at any time. Stay with a topic like trade while its hot and suspend coverage or switch coverage areas when it’s not. We serve customers one by one 24/7.

Tony Mace was the top editorial executive for Market News International for two decades. 

Washington Bureau Chief Denny Gulino had the same title at Market News for 18 years. 

Similar experience undergirds our service in Ottawa, London, Brussels and in Asia.

 

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