The Fed leaves its short-term interest rate target alone (for now) but expects sluggish economic growth. Here are the five things we learned from U.S. economic data released during the week ending March 21.
The Federal Reserve held firm even as it foresees tepid economic activity. The statement released following the past week’s Federal Open Market Committee (FOMC) noted economic growth being “at a solid pace” but warned about “increased” uncertainty and “somewhat elevated” inflation. As a result, the committee voted unanimously to keep the fed funds target rate at 4.25 percent – 4.50 percent. Most of the FOMC also agreed to slow the Fed’s shrinking of its holdings of Treasuries (one member voted against this change). The committee also “strongly” reaffirmed its commitment “to supporting maximum employment and returning inflation to its 2 percent objective.”
Released at the same time were economic projections by the Federal Reserve Board members and Federal Reserve Bank presidents. The median forecast lowers 2025 GDP growth by 4/10ths of a percentage point to +1.7 percent and 2026 growth by 2/10ths of a point to +1.8 percent. The group expects the unemployment rate to hold relatively steady (2025: 4.4 percent; 2026: 4.3 percent) and inflation to remain above the Fed’s two-percent target. The committee anticipates the PCE inflation rate to be +2.7 percent this year and +2.2 percent next year. The forecasted core PCE rates were at +2.8 percent and +2.2 percent, respectively. The group expects two quarter-point fed funds rate cuts this year and another two next year.
Retail sales rose but underperformed expectations in February. The Census Bureau estimates retail and food services sales edged up 0.2 percent to a seasonally adjusted $722.7 billion, up 3.1 percent from a year earlier. Sales from December to February were up 0.6 percent over the previous three-month period and 3.8 percent over their year-ago comparable. Sales fell at motor vehicle/parts dealers (-0.4 percent) and gas stations (-1.0 percent). Net of both, core retail sales jumped 0.5 percent in February and 3.5 percent from a year earlier. Sales improved at retailers focused on health/personal care (+1.7 percent), groceries (+0.4 percent), and building materials (+0.2 percent). Declining were sales at department stores (-1.7 percent), restaurants/bars (-1.5 percent), apparel retailers (-0.6 percent), sporting goods/hobby stores (-0.4 percent), and electronics/appliance retailers (-0.3 percent).
Existing home sales rebounded in February. Sales of previously owned homes rose 4.2 percent to a seasonally adjusted annualized rate (SAAR) of 4.260 million units. The National Association of Realtors measure was 1.2 percent below year-ago levels. Sales grew in the West and South during February, held steady in the Midwest, and declined in the Northeast. Helping was a 5.1 increase in inventories to 1.240 million homes, up 17.0 percent from a year earlier and the equivalent of a 3.5-month supply. The median sales price grew 3.8 percent over the past year to $398,400. The press release noted, “[h]ome buyers are slowly entering the market.”
Manufacturing output rose in February. The Federal Reserve reports manufacturing production advanced a seasonally adjusted 0.9 percent, well above January’s 0.1 percent tepid gain. Durable good production surged 1.6 percent (with a strong gain for motor vehicles/parts), while nondurable output increased 0.2 percent. Overall, industrial production increased by 0.7 percent, with mining output jumping by 2.8 percent, but utilities reported a 2.5 percent drop. Relative to a year earlier, industrial production has risen 1.4 percent, with manufacturers seeing a 0.7 percent increase. Manufacturing capacity utilization grew by 6/10th of a percentage point to 77.0 percent.
Forward-looking measures suggest a slowing U.S. economy. The Conference Board’s Leading Economic Index (LEI) slipped 0.3 percent in February to 101.1 (2016=100). The LEI has declined three consecutive months and has fallen 1.0 percent over the past six months. Four of ten LEI components made positive contributions to the index, led by weekly manufacturing hours, stock prices, and the interest rate spread. The Coincident Economic Index (CEI) increased 0.4 percent during the month (and +1.2 percent over the past six months) to 114.2. All CEI components positively contributed to the index, led by industrial production. The Lagging Economic Index (LAG) slumped 0.4 percent to 118.2 (+0.2 percent versus August 2024), with three of seven LAG components making positive contributions. The Conference Board expects the U.S. economy will grow 2.0 percent in 2025.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending March 15, 2025, First-Time Claims, seasonally adjusted): 223,000, +2,000 vs. the previous week, +10,000 vs. the same week a year earlier). 4-week moving average: 227,000 (+7.2% vs. the same week a year earlier).
- Import Prices (February 2025, All Imports, not seasonally adjusted): +0.4% vs. January 2025; -2.0% vs. February 2024. Nonfuel Imports: +0.3% vs. January 2025; +2.0% vs. February 2024.
- Export Prices (February 2025, All Exports: +0.1% vs January 2025; +2.1% vs. February 2024. Nonagricultural Exports: +0.1% vs. January 2025; +2.2% vs. February 2024.
- Housing Starts (February 2025, Privately-Owned Housing Starts, seasonally adjusted annualized rate): 1.501 million (+11.2 % vs. January 2025; -2.9% vs. February 2024).
- Housing Market Index (February 2025, Index (>50 = More Homebuilders View the Housing Market as “Good” Than “Poor”), seasonally adjusted): 39 (January 2025: 42; February 2024: 48).
- Business Inventories (January 2025, Manufacturers’ and Trade Inventories, seasonally adjusted annualized rate): $2.592 trillion (+0.3% vs. December 2024; +2.3% vs. January 2024).
- Treasury International Capital Flows (January 2025, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$0.2 billion (December 2024: +$83.0 billion; January 2024: -$39.6 billion).
- State Employment (January 2025, Nonfarm Employment, seasonally adjusted): Decreased in 4 states and unchanged in 46 states and the District of Columbia vs. December 2024. Increased in 17 states and unchanged in 33 states and the District of Columbia vs. January 2024.
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What We Learned About the U.S. Economy Last Week 