Survey Note: Detailed Analysis of US Automotive Industry Metrics for January 2025

This report provides an in-depth analysis of the provided table, which outlines various metrics for the US automotive industry, likely reflecting data for January 2025, given the current date of February 28, 2025. The table includes monthly percentage changes, 3-month moving average (MA) changes, annual percentage changes, and average monthly and annual percentage changes for categories such as production, sales, imports, and exports. The analysis aims to identify trends, verify data against reliable sources, and highlight any anomalies for further investigation.

Data Structure and Interpretation

The table is structured with 16 rows, each representing a different metric, identified by numbers from 0 to 15, and includes the following columns:

• Monthly (%): Percentage change from the previous month.


• 3-Mo MA (%): Percentage change of the 3-month moving average, likely compared to the previous 3-month period.


• Annual (%): Percentage change from the same month in the previous year.


• Avg Monthly (%): Average of monthly percentage changes, possibly over the past year.


• Avg Annual (%): Average of annual percentage changes, potentially over a longer historical period.

The metrics cover a broad range, including Canadian and Mexican auto imports, domestic auto production, various retail sales categories (e.g., domestic and foreign autos, light and heavy weight trucks), and inventory levels. Below is the complete table for reference:

ID	Metric	Monthly (%)	3-Mo MA (%)	Annual (%)	Avg Monthly (%)	Avg Annual (%)
15	Canadian Auto Imports	-20.63%	-9.42%	-41.94%	1.10%	1.04%
4	Domestic Auto Production	-6.26%	-7.87%	-21.92%	7.36%	18.14%
14	Motor Vehicle Retail Sales: Foreign Light Weight Trucks	-3.73%	1.03%	15.11%	0.92%	7.42%
3	Domestic Auto Inventories	-0.94%	-4.76%	-14.50%	-0.36%	-1.10%
6	Motor Vehicle Retail Sales: Domestic Autos	-8.66%	-4.93%	-13.80%	0.15%	-0.99%
10	Auto Exports	-14.19%	-0.42%	-10.23%	66.76%	103.74%
12	Motor Vehicle Retail Sales: Foreign Autos	-8.81%	-0.86%	7.99%	0.37%	1.88%
8	Motor Vehicle Retail Sales: Domestic and Foreign Autos	-8.69%	-3.49%	-6.94%	0.06%	-1.55%
9	Motor Vehicle Retail Sales: Light Weight Trucks	-7.20%	-0.46%	6.56%	0.53%	4.33%
11	Motor Vehicle Retail Sales: Domestic Light Weight Trucks	-8.11%	-0.86%	4.39%	0.63%	5.48%
1	Light Weight Vehicle Sales: Autos and Light Trucks	-7.47%	-1.03%	3.88%	0.27%	1.25%
7	Light Weight Vehicle Sales	-25.63%	-5.25%	3.80%	0.99%	1.32%
2	Motor Vehicle Retail Sales: Heavy Weight Trucks	8.15%	2.06%	-3.73%	0.26%	2.74%
0	Total Vehicle Sales	-7.06%	-0.94%	3.63%	0.26%	1.25%
13	Mexican Auto Imports	11.60%	-0.95%	3.50%	2.48%	10.26%
5	Auto Inventory/Sales Ratio	8.46%	0.37%	-0.78%	0.31%	2.89%

Verification Against Reliable Sources

To assess the accuracy of the table, data was cross-referenced with sources such as FRED, MarkLines, and the Bureau of Economic Analysis. The following observations were made:

• Domestic Auto Production (Row 4): The monthly change of -6.26%, 3-month MA change of -7.87%, and annual change of -21.92% were verified using FRED's DAUPSA series (FRED: Domestic Auto Production). For January 2025, production was estimated at 95.8 thousand units, with December 2024 at 102.2 thousand units, yielding a -6.26% monthly change. The 3-month MA calculation also aligned, confirming the data's consistency.


• Auto Exports (Row 10): The table reports a monthly change of -14.19%, 3-month MA change of -0.42%, and annual change of -10.23%, with average monthly and annual changes of 66.76% and 103.74%, respectively. However, FRED's AUENSA series (FRED: Auto Exports) for December 2024 shows exports at 64.368 thousand units, with November 2024 at 68.723 thousand units, resulting in a -6.34% monthly change, which does not match. The high average changes (66.76% and 103.74%) appear anomalous, suggesting a possible error or different metric definition, as such growth rates are unrealistic for auto exports.


• Sales Data: MarkLines reported US auto sales for January 2025 at 1,112,944 units, up 3.8% year-over-year (MarkLines: US auto sales January 2025), which aligns with the table's total vehicle sales annual increase of 3.63%. However, detailed breakdowns for specific categories (e.g., foreign vs. domestic) were not directly comparable, indicating the table may use a custom compilation.

Key Trends and Insights

The analysis reveals a mixed picture for the US automotive industry in January 2025:

• Short-Term Declines: Several metrics, including domestic auto production (-6.26% monthly), domestic auto sales (-8.66% monthly), and Canadian auto imports (-20.63% monthly), show significant short-term decreases. Light weight vehicle sales also experienced a sharp -25.63% monthly drop, possibly due to seasonal factors or market shifts.


• Annual Growth in Some Segments: Despite monthly declines, certain categories show annual growth, such as foreign light weight truck sales (15.11% annually) and Mexican auto imports (3.50% annually). Total vehicle sales also increased 3.63% annually, suggesting resilience in the broader market.


• Long-Term Averages: The average monthly and annual changes generally indicate positive historical trends, with domestic auto production averaging 7.36% monthly and 18.14% annually. However, negative averages for domestic auto inventories (-0.36% monthly, -1.10% annually) suggest ongoing challenges in inventory management.


• Trade Dynamics: The significant decline in Canadian auto imports (-41.94% annually) contrasts with the growth in Mexican imports, potentially reflecting shifts in trade policies or supply chain preferences. The auto inventory/sales ratio increased 8.46% monthly, which may indicate improving alignment between inventory and sales.

Implications for Stakeholders

The data suggests that while the industry faces short-term challenges, particularly in domestic production and sales, long-term trends remain positive for many segments. Stakeholders should monitor inventory levels, as declining domestic auto inventories may signal efficient sales or reduced production capacity. The shift towards foreign light weight trucks and Mexican imports could indicate changing consumer preferences or trade dynamics, which may require strategic adjustments. The anomaly in auto export averages highlights the importance of data accuracy, and stakeholders should cross-check with official sources before making decisions.

Conclusion

The provided table offers valuable insights into the US automotive industry's performance for January 2025, with some data points verified against reliable sources. However, discrepancies, particularly in auto exports, suggest caution in interpretation. For a comprehensive understanding, it is recommended to consult official data from FRED, the Bureau of Economic Analysis, and industry reports, ensuring alignment with the specific definitions and time periods used.

Key Citations

• FRED Domestic Auto Production data from Jan 1993 to Dec 2024


• FRED Auto Exports data from Jan 1993 to Nov 2024


• MarkLines US auto sales data for January 2025

Personal Income and Outlays

### Key Points

- It seems likely that the recent drop in durable goods spending is due to Trump's tariffs, which increased prices and reduced consumer spending.

- Research suggests consumption is faltering despite growing income, possibly due to economic uncertainty.

- The evidence leans toward stable inflation not driving the drop, with tariffs and consumer caution playing bigger roles.

- Durable goods spending's sharp decline in February 2025 is notable, likely linked to new tariffs on imports.

### Analysis

#### Overview

The economic data provided shows various metrics for personal consumption and income as of February 28, 2025, with a focus on short-term trends, consumption versus income, inflation, and durable goods spending. The analysis reveals a complex picture where recent policy changes, particularly tariffs, seem to be impacting consumer behavior.

#### Short-Term vs. Long-Term Trends

The monthly data indicates a significant decline in durable goods spending (-3.35%), contrasting with positive annual growth (5.26%). This suggests a recent slowdown, possibly due to seasonal factors or policy shifts like tariffs implemented in February 2025. The 3-month moving average (0.23%) being positive indicates the drop might be recent, while historical averages (average monthly 0.40%, average annual 4.70%) show consistent growth, highlighting a potential temporary dip.

#### Consumption vs. Income

Real disposable income is growing steadily (monthly +0.56%, annual +1.82%), which should support consumption. However, durable goods spending is faltering, suggesting consumers might be saving more or cautious due to price increases from tariffs or general economic uncertainty. This mismatch is unexpected, as growing income typically boosts spending, but current data shows a disconnect, possibly driven by external policy impacts.

#### Inflation

Inflation, measured by PCE excluding food and energy, shows a monthly increase of 0.28% and an annual rate of 2.65%, which is stable and within a manageable range. This stability suggests inflationary pressures are not the primary driver of the consumption drop, with tariffs and consumer caution likely playing bigger roles. Historically, average annual inflation was higher (3.24%), indicating current rates are relatively controlled.

#### Durable Goods Weakness

The sharp monthly drop in durable goods spending (-3.35%) stands out, likely linked to Trump's tariffs on imports from China (10% effective February 4, 2025), which increased prices for goods like electronics and vehicles. Consumer confidence also plunged in February 2025 due to tariff concerns, potentially amplifying the effect. This decline is unexpected given the positive income growth, highlighting policy impacts on spending behavior.

New Residential Sales

 This updated housing data provides further insight into market trends, showing significant shifts in inventory, pricing, and sales activity. Here are the key takeaways:

1. Rising Inventory and Supply

• Completed new houses for sale increased 1.77% monthly and 38.55% annually, with an average annual increase of 5.48%.
• The monthly supply of new houses surged 12.50% monthly and 8.43% annually, indicating growing availability.

2. Declining Cash Purchases & Slower Sales

• Cash purchases dropped 42.86% month-over-month and 27.27% year-over-year, suggesting fewer cash buyers in the market.
• Total new houses sold by sales price remained flat on a monthly basis but declined 3.45% annually.

3. Price Trends Reflect Moderate Growth

• The median sales price of new houses increased 0.94% monthly and 1.26% annually, with an average annual increase of 17.89%, suggesting long-term price resilience.
• The average sales price rose 2.33% monthly and 2.74% annually, averaging an 18.67% annual increase, indicating sustained pricing strength despite weaker demand.

4. Homes Taking Longer to Sell

• The median number of months on the market for newly completed homes rose 11.11% monthly and 7.89% over the past three months, showing slowing turnover rates.

What This Means for the Market

• The rising supply of homes suggests a market gradually shifting toward buyers.
• Weaker sales & fewer cash buyers indicate affordability concerns and high borrowing costs.
• Housing prices remain firm, but a cooling trend could emerge if sales continue to lag.

New Residential Construction

 The data on new privately-owned housing units provides a mixed outlook for the U.S. housing market. Here are the key takeaways:

1. Decline in Housing Starts and Permits:

   • Total housing starts dropped 9.83% month-over-month and 0.73% year-over-year, indicating a slowdown in new home construction.
   • Single-family housing starts saw an 8.39% monthly decline and 1.78% annual drop, suggesting weaker demand or builder caution.
   • Multifamily housing starts (5+ units) declined 11.03% monthly, though they were up 2.31% year-over-year.
   • Building permits for total housing fell 0.61% monthly and 2.32% annually, showing a slowing pace of new projects entering the pipeline.
   • Single-family permits declined 0.20% monthly and 3.59% annually, reinforcing a cooling trend in single-family home construction.

2. Ongoing Decline in Units Under Construction:

   • Total units under construction fell 1.40% monthly and 15.63% annually, showing a consistent contraction in active projects.
   • Single-family homes under construction declined 0.47% monthly and 6.29% annually, aligning with the downturn in starts.
   • Multifamily units under construction experienced a sharp 2.09% monthly decline and a 22.50% annual decline, indicating a slowdown in larger apartment and condo developments.

3. Increase in Housing Completions:

   • Total completions rose 7.63% month-over-month and 9.77% year-over-year, meaning more homes are being finished and entering the market.
   • Single-family completions increased 7.09% monthly and 8.87% annually, likely boosting available inventory.
   • Multifamily (5+ units) completions saw a strong 10.14% monthly rise and 11.83% annual increase, signaling a shift in supply from construction to market availability.

4. Increase in Permits Not Yet Started:

   • Units authorized but not started increased 3.59% monthly and 6.41% annually, suggesting that while permits are being issued, builders may be delaying construction.

Implications:

• The data suggests a slowdown in new housing starts and construction, particularly in the single-family sector.
• However, the increase in housing completions means more inventory is becoming available, which could help ease supply constraints.
• The decline in units under construction, especially for multifamily homes, could lead to future shortages if demand remains steady.
• Housing permits have declined, indicating future construction may continue slowing unless market conditions improve.

Key Factors to Watch:

• Interest rates: High mortgage rates are likely discouraging new construction and demand.
• Housing affordability: If prices remain high despite increased completions, demand could weaken further.
• Labor and material costs: Builders may be delaying projects due to cost uncertainties.
• Rental market: The decline in multifamily construction could tighten the rental market in the coming months.

U.S. Housing Market Trends: A Look at Annual Price Changes in February 2025

The Shifting Landscape of U.S. Home Prices: Key Trends and Regional Insights

The U.S. housing market continues to evolve, with varying trends across different cities and regions. The latest S&P CoreLogic Case-Shiller Home Price Index highlights significant contrasts in home price appreciation, with some cities showing robust growth while others experience cooling or even declining values.

Regional Performance: Winners and Losers

Northeast: Leading Growth

New York (7.22%) and Boston (6.34%) are among the top-performing cities in terms of home price growth. The strong demand in these markets is driven by limited housing supply, a resilient job market, and continued demand for urban living. Washington, DC (5.55%) also shows solid growth, likely due to the stability provided by government and public sector employment.

Midwest: Stability and Affordability

Chicago (6.60%) leads the Midwest in home price growth, indicating sustained demand for housing. Detroit (4.76%), Cleveland (5.24%), and Minneapolis (3.20%) continue to see moderate appreciation, as their relative affordability attracts buyers seeking alternatives to high-cost coastal cities.

West Coast: Cooling Market

Traditionally strong markets like San Francisco (2.60%), Seattle (5.61%), and Portland (2.92%) are experiencing slower growth or stagnation. This trend can be attributed to affordability challenges, migration to lower-cost regions, and tech industry slowdowns. Los Angeles (3.57%) and San Diego (5.51%) continue to show moderate appreciation, though at a slower pace than in previous years.

South: A Mixed Picture

Southern cities show mixed results, with Miami (3.28%) and Atlanta (2.35%) still growing but at a slower rate than their pandemic-era peaks. Dallas (1.61%) and Phoenix (2.09%) exhibit signs of cooling, likely due to rising mortgage rates impacting affordability. Tampa (-1.11%) stands out as the only metro experiencing a decline in home prices, suggesting a shift in demand.

Key Economic Correlations

Several economic factors are influencing these trends:

• Interest Rates & Affordability: Higher mortgage rates have softened price growth, especially in high-cost markets.

• Remote Work & Migration: Cities with large remote work populations, such as San Francisco and Seattle, have seen slower appreciation as residents relocate to more affordable areas.

• Regional Job Markets: Cities with strong job growth (New York, Chicago, Boston) are maintaining housing demand, while those reliant on tech (San Francisco, Seattle) are slowing.

• Housing Supply: Limited new construction in cities like New York and Boston is keeping prices high, whereas Sun Belt cities like Phoenix and Dallas may be seeing overbuilding, tempering price growth.

Looking Ahead

The U.S. housing market is experiencing a period of regional divergence. While some cities continue to see strong appreciation, others are cooling due to economic shifts, affordability constraints, and changing migration patterns. Buyers and investors should closely monitor these trends to make informed decisions in this evolving landscape.

Existing Home Sales Data: A Cooling Market Signals a Shift to Buyers in January 2025

 

Posted on February 21, 2025

The latest existing home sales data dropped today, and it’s painting a picture of a housing market that’s hitting the brakes after years of high heat. Released by the National Association of Realtors (NAR) on February 21, 2025, the numbers for January 2025 show declining sales, rising inventory, and a rare dip in prices—hinting at a shift toward a buyer’s market. Let’s break it down and see what it means for homeowners, buyers, and the broader economy.

The Numbers at a Glance

• Sales: Existing home sales fell 4.9% month-over-month to a seasonally adjusted annual rate of 4.08 million units, down from 4.24 million in December 2024. Single-family home sales dropped even more, by 5.15%. Despite the decline, sales are still up 2% from January 2024.


• Inventory: The number of homes for sale rose 3.51% from December, with single-family inventory up 4.04%. Year-over-year, inventory is a whopping 16.83% higher than last January.


• Months Supply: This metric, which measures how long it’d take to sell all listed homes at the current pace, surged 9.38% to a higher level, with single-family homes at 9.68%. Annually, it’s up 16.67%.


• Prices: The median sales price for existing homes slipped 1.68% to a still-elevated figure (specific dollar amounts weren’t in the data, but context suggests around $400K nationally), while single-family homes saw a 1.59% drop. Yet, prices are up 4.83% from a year ago.

What’s Happening?

January’s data reflects contracts signed in late 2024, a time when mortgage rates likely hovered around 6.5-7% (based on recent trends) and holiday distractions slowed activity. The 4.08 million sales rate missed analysts’ expectations of 4.13 million, signaling a weaker-than-anticipated start to 2025. But the story isn’t just about a monthly dip—it’s about a broader shift.

1. Sales Are Cooling Fast
   A nearly 5% drop in sales isn’t shocking for January, a traditionally slow month. But paired with a modest 2% annual gain, it’s clear the frenzied demand of 2021-2023 has faded. High interest rates, affordability challenges, and economic uncertainty might be keeping buyers on the sidelines. The 3-month moving average, up slightly at 0.4%, suggests this downturn is fresh—sales were holding steady until recently.


2. Inventory Is Finally Growing
   After years of scarcity, inventory is making a comeback. The 3.51% monthly increase and 16.83% annual jump show sellers are listing more homes, possibly lured by still-high prices or forced by life changes (think job relocations or downsizing). The 9.38% spike in months supply—meaning homes are sitting longer—reinforces that demand isn’t keeping up.


3. Prices Dip, But Not Collapse
   A 1.68% monthly price drop is notable—it’s not often we see median prices fall. Yet the 4.83% year-over-year gain proves the market hasn’t tanked. Prices are softening as supply rises and buyers hesitate, but they’re still well above last year’s levels, buoyed by long-term appreciation.

What Does It Mean?

This data points to a housing market in transition:

• A Buyer’s Market Emerges: More homes, longer selling times, and falling prices tilt the scales toward buyers. If you’ve been priced out or waiting for leverage, 2025 might be your year.


• Sellers Adjust: Homeowners listing now may face competition and need to price competitively—those sky-high asking prices from 2022 might not fly anymore.


• Economic Signals: Weak sales and a missed forecast could hint at broader consumer caution. If mortgage rates don’t ease soon (say, below 6%), demand might stay sluggish.

The Bigger Picture

The NAR will likely spin this as a seasonal blip, touting the inventory growth as a silver lining. And they’re not wrong—more homes on the market is a relief after years of shortages. But the sharp monthly declines suggest deeper issues: affordability remains a hurdle with rates high and wages stagnant for many. The 3-month stability (0.4% sales growth) offers hope this isn’t a freefall, but January’s numbers could be the start of a correction.

On the flip side, some skeptics might argue the annual gains mask distress—like cash investors propping up sales or regional disparities (think Midwest resilience vs. coastal slowdowns). Without regional data, it’s hard to say, but the national trend leans toward normalization, not collapse.

Looking Ahead

If inventory keeps climbing and rates ease (say, with Fed cuts in 2025), we could see a balanced market by summer. Buyers might find deals, especially if prices dip further. Sellers, though, may need patience—or a willingness to negotiate. For now, January 2025 marks a pivot: the seller’s paradise is fading, and buyers are catching a break.

What do you think—time to buy, sell, or wait? Drop your thoughts below!

Analyzing U.S. Federal Debt Trends: Insights from the FRED Series Data Plot

 

The Evolution of Federal Debt as a Share of GDP: A Historical Perspective

The U.S. federal debt has long been a subject of economic debate, with its levels fluctuating in response to economic conditions, policy decisions, and crises. The plot above provides a comprehensive historical perspective on federal debt as a percentage of Gross Domestic Product (GDP), highlighting different categories of debt holders over time.

Key Takeaways from the Data

1. Total Public Debt as a Share of GDP Has Grown Substantially
   The blue line represents the total public debt as a percentage of GDP. From the late 1960s through the early 2000s, federal debt remained relatively contained. However, a clear turning point occurred after the 2008 financial crisis, with debt surging above 100% of GDP. The COVID-19 pandemic triggered another massive spike, pushing debt levels beyond 120% of GDP.

2. Debt Held by the Public vs. Private Investors
   The orange line, depicting debt held by the public, mirrors the trend of total debt. Interestingly, the purple line, representing debt held by private investors, has also increased significantly over time. However, it saw a temporary decline post-2008, possibly reflecting the Federal Reserve's intervention through bond purchases.

3. Foreign and International Holders
   The green line illustrates the portion of U.S. debt held by foreign and international investors. This segment has grown gradually since the 1980s, peaking around 2015, before stabilizing. This trend suggests increasing global reliance on U.S. Treasury securities, though recent shifts indicate a potential decline in foreign appetite.

4. The Role of the Federal Reserve
   The red line indicates debt held by the Federal Reserve. Notably, the Fed's holdings surged during the 2008 financial crisis and the COVID-19 pandemic, reflecting its role in stabilizing financial markets through large-scale asset purchases. However, recent data shows a decline, likely due to the Fed’s quantitative tightening policies.

5. Debt Held by Agencies and Trusts
   The brown line represents debt held by agencies and trust funds, such as Social Security and Medicare. Unlike other debt categories, this portion has remained relatively stable, growing at a slower pace than public or foreign holdings.

Interpreting the Trends: What Lies Ahead?

• Rising Federal Debt & Economic Growth: The persistent rise in debt-to-GDP ratios raises concerns about long-term fiscal sustainability. While high debt levels are manageable with strong economic growth and low interest rates, persistent deficits could lead to challenges in funding government programs without tax increases or spending cuts.

• Foreign Ownership & Global Shifts: A potential decline in foreign-held U.S. debt might indicate diversification efforts by major holders like China and Japan. If foreign demand weakens significantly, the U.S. government may need to rely more on domestic investors.

• Federal Reserve’s Balancing Act: The Fed's role in absorbing government debt during crises has been crucial, but its ongoing balance sheet reduction could have implications for bond yields and borrowing costs.

Final Thoughts

Understanding federal debt composition provides valuable insights into economic trends, investor confidence, and fiscal policies. While current debt levels are historically high, the ability to manage them will depend on factors such as economic growth, interest rates, and policy decisions. Keeping an eye on these trends will be essential for policymakers, investors, and the general public alike.

What are your thoughts on the rising federal debt? Do you think current levels are sustainable, or do they pose significant economic risks? Let’s discuss in the comments!

GOP pushes controversial plan to extend Trump's 2017 tax cuts without counting $4T+ cost to deficit

 🧵 BREAKING: GOP pushes controversial plan to extend Trump's 2017 tax cuts without counting $4T+ cost to deficit

1/ Republican leaders argue extending existing tax cuts wouldn't create "real" deficit increase. Current revenue at 17.3% of GDP would stay stable, they claim.

2/ Independent analysts project $4-4.8T added to debt over next decade. Two major credit agencies have already downgraded US debt rating.

3/ GOP needs special procedures to bypass Senate Dems. House Speaker Johnson backs "current policy baseline" approach, but faces pushback from party's deficit hawks.

4/ Republicans say costs would be offset by:

• $2T in spending cuts
• Eliminating green energy incentives
• Economic growth
• Increased fossil fuel production

5/ Context: Similar growth promises in 2017 didn't prevent those tax cuts from adding $2.5T to national debt. Current deficit already at $1.8T.

6/ Congressional deadlines loom:

• Gov't funding: March 14
• Debt ceiling: Summer
• Tax cuts expire: End of 2024

🔑 Key question: Will markets accept this new approach to deficit accounting?

#TaxCuts #Congress #Economy

U.S. PPI Report: Inflation Remains Sticky

 

🚨 U.S. PPI Report: Inflation Remains Sticky 🚨

The Producer Price Index (PPI) rose 0.4% in January, exceeding expectations and signaling persistent inflation. Over the past year, PPI increased 3.5%, with core PPI (excluding food, energy, and trade services) up 3.4% YoY.

🔹 Goods prices rose 0.6%, driven by a 1.7% jump in energy and 1.1% increase in food. Diesel fuel surged 10.4%, while fresh vegetables dropped 22.3%.
🔹 Services prices climbed 0.3%, marking the 6th straight monthly increase. Hospitality and transportation costs were the main drivers.

📈 This hotter-than-expected inflation print makes it less likely the Fed will cut rates soon. Markets are adjusting expectations—are you?

#PPI #Inflation #FederalReserve #StockMarket #Economy

Understanding the Latest CPI and Core CPI Trends

The latest Consumer Price Index (CPI) and Core CPI data provide valuable insights into inflation trends and their potential impact on the economy. Let’s break down the key takeaways from the most recent report.

Key CPI & Core CPI Data (January 2025)

• CPI: +0.5% month-over-month (MoM), +3.0% year-over-year (YoY)

• Core CPI: +0.4% MoM, +3.3% YoY

Analysis of Inflation Trends

1. CPI Trends Over Time

Over the past year, CPI has fluctuated, reflecting ongoing economic pressures. Notably:

• Early 2024: CPI grew steadily, peaking at 0.5% MoM in January 2025.

• Mid-2024: Growth slowed, with negative or minimal increases.

• Late 2024: Inflation rebounded, with a noticeable uptick in recent months.

The current CPI YoY rate of 3.0% suggests that inflation remains above the Federal Reserve’s 2% target but has eased from its 2022 peak.

2. Core CPI Signals Underlying Inflation Pressure

Core CPI, which excludes volatile food and energy prices, remains elevated at 3.3% YoY. This indicates that inflation in essential services—such as housing, medical care, and education—remains persistent.

Key observations:

• Core CPI outpaced overall CPI throughout 2024, highlighting stickier price pressures in services.

• The MoM Core CPI increase of 0.4% in January signals continued price growth, particularly in non-energy-related sectors.

What’s Driving Inflation?

1. Housing & Shelter Costs: Still a major contributor, with annual growth above 4.0%.

2. Services Inflation: Driven by rising costs in medical care and transportation.

3. Energy & Food Prices: More volatile, showing mixed trends but lower overall impact compared to previous years.

Potential Economic Impact

• Federal Reserve Policy: Persistent inflation could delay interest rate cuts, as the Fed monitors price stability.

• Consumer Spending: Higher prices may reduce purchasing power, impacting economic growth.

• Stock & Bond Markets: Inflation concerns could influence market volatility and investor sentiment.

Final Thoughts

While inflation has moderated from its peak, persistent Core CPI increases suggest continued challenges. The coming months will be crucial in determining whether inflation stabilizes or requires further monetary policy adjustments.

Analysis of Inflation Rate vs. M2 Growth Rate by Country

 

The relationship between the Inflation Rate (%) and M2 Growth Rate (%) (money supply growth) varies across countries, showing interesting economic dynamics.

---

1. General Observations

• Countries with high M2 growth rates tend to have higher inflation rates.
• Some exceptions exist where M2 growth does not directly correlate with inflation.
• Emerging markets and economies with unstable monetary policies show extreme values.

---

2. High Inflation & High M2 Growth

• Argentina (Inflation: 118.00%, M2 Growth: 67.19%)
  • Severe inflation crisis; excessive money supply expansion.
• Turkey (42.12%, 43.92%)
  • High inflation driven by aggressive monetary expansion.
• Russia (9.50%, 66.96%)
  • Inflation still high despite tight monetary policy attempts.
• Mexico (3.59%, 38.88%)
  • High M2 growth but moderate inflation, possibly due to policy interventions.

💡 Pattern: Countries with inflation crises (e.g., Argentina, Turkey) have high money supply growth, leading to monetary devaluation and hyperinflation.

---

3. Moderate Inflation & M2 Growth

• Brazil (4.83%, 13.32%)
  • Inflation under control despite relatively high money supply expansion.
• India (5.22%, 12.36%)
  • Slightly elevated inflation, but stable due to strong economic growth.
• Indonesia (0.76%, 10.08%)
  • Low inflation despite double-digit money supply growth.
• Germany (2.30%, 12.72%)
  • A surprising outlier; inflation remains low despite strong M2 growth.
• France (1.40%, 10.35%)
  • Similar to Germany, relatively low inflation with higher money supply.

💡 Pattern: Some developed economies (Germany, France) seem resilient to inflation despite increasing M2, likely due to efficient financial systems and stable demand for money.

---

4. Low Inflation & Low M2 Growth

• China (0.50%, 0.55%)
  • Very low inflation and controlled money supply, possibly due to weak domestic demand.
• Switzerland (0.60%, 1.96%)
  • Extremely stable, indicating strong monetary and fiscal discipline.
• Canada (1.80%, 0.14%)
  • Almost no money supply growth, low inflation.
• Euro Area (2.50%, 0.20%)
  • Strict monetary control.
• Japan (3.60%, 0.22%)
  • Moderate inflation despite stagnant money supply, possibly due to supply-side factors.

💡 Pattern: Advanced economies (China, Switzerland, Euro Area) keep inflation low without excessive M2 expansion, demonstrating strong monetary control and weak inflationary pressures.

---

5. Special Cases

• Saudi Arabia (1.90%, -1.28%)
  • Negative M2 growth (money contraction) but stable inflation, possibly due to oil wealth and monetary peg.
• Netherlands (3.30%, 0.006%)
  • Very low M2 growth but moderate inflation, indicating non-monetary inflationary pressures.
• United States (2.90%, 0.40%)
  • Moderate inflation despite near-zero money supply growth, likely driven by supply-side inflation (energy, housing).

💡 Pattern: Some economies have inflation driven by external factors (energy, supply shocks) rather than money supply expansion.

---

6. Correlation Between Inflation & M2 Growth

• The data suggests a positive correlation between M2 Growth and Inflation, but not a perfect one.
• Outliers (e.g., Germany, France, Indonesia) show that factors like monetary policy, fiscal policy, and demand-side dynamics influence inflation beyond just money supply.

---

7. Conclusion

1. High inflation countries (Argentina, Turkey, Russia) have excessive M2 growth.
2. Advanced economies (Switzerland, Canada, China) manage stable inflation with low or negative M2 growth.
3. Some economies (Germany, France, Indonesia) show low inflation despite M2 growth, indicating strong financial stability.
4. Inflation is not solely determined by M2 growth, as supply-side factors (oil, housing, global trade) also play a role.

Labor Force Status Flows from the Current Population Survey

 

The latest data from the Current Population Survey (CPS), released today, provides insights into labor force status flows, which track the movement of individuals among employment, unemployment, and non-participation in the labor force. These flows offer a nuanced understanding of the labor market dynamics beyond static employment and unemployment rates.

Key Observations:

1. Not in Labor Force to Unemployed:

   • Monthly Change: An increase of 9.48% indicates that more individuals who were previously not seeking work have started job searches, thereby entering the labor force as unemployed persons.
   • 3-Month Moving Average (MA): A 3.79% rise suggests a consistent trend over the past quarter.
   • Annual Change: A significant 12.01% uptick year-over-year highlights a growing inclination among non-participants to seek employment.

2. Unemployed to Employed:

   • Monthly Change: A 3.92% increase reflects successful job placements among the unemployed.
   • 3-Month MA: A 4.32% growth indicates sustained positive momentum in re-employment.
   • Annual Change: An 11.10% rise year-over-year underscores improvements in job-finding rates.

3. Not in Labor Force to Employed:

   • Monthly Change: A 2.74% increase shows that some individuals are moving directly into employment from non-participation.
   • 3-Month MA: A 3.53% rise suggests this movement is consistent over the quarter.
   • Annual Change: A decrease of 6.59% year-over-year may indicate challenges for non-participants entering employment directly, possibly due to skill mismatches or other barriers.

4. Unemployed to Not in Labor Force:

   • Monthly Change: A decline of 5.46% suggests fewer unemployed individuals are exiting the labor force, which is a positive sign.
   • 3-Month MA: A slight decrease of 1.11% supports this trend.
   • Annual Change: A 3.79% decrease year-over-year indicates fewer discouraged workers.

5. Employed to Not in Labor Force:

   • Monthly Change: A 3.38% increase points to more employed individuals leaving the labor force, which could be due to retirements or other personal reasons.
   • 3-Month MA: A slight decline of 0.45% suggests this is not a sustained trend.
   • Annual Change: A 2.32% decrease year-over-year indicates fewer workers are exiting the labor force compared to the previous year.

6. Employed to Unemployed:

   • Monthly Change: A decrease of 2.23% indicates fewer individuals are losing jobs.
   • 3-Month MA: A 4.25% decline reinforces this positive trend.
   • Annual Change: A 1.63% decrease year-over-year suggests improved job stability.

7. Employed to Employed:

   • Monthly Change: A marginal increase of 0.24% reflects stable job-to-job transitions.
   • 3-Month MA: A negligible rise of 0.02% indicates little change in job mobility.
   • Annual Change: A 0.69% increase year-over-year suggests consistent job mobility.

Overall Assessment:

The labor market exhibits positive dynamics, with increased transitions from unemployment to employment and a decline in movements from employment to unemployment. The rise in individuals entering the labor force, either as employed or unemployed, points to growing confidence in job prospects. However, the decrease in direct transitions from non-participation to employment suggests potential barriers for certain groups, warranting targeted policy interventions to facilitate their entry into the workforce.

These labor force flows provide a comprehensive view of the underlying movements within the labor market, offering valuable insights for policymakers and economists in understanding and addressing current labor market challenges.

Labor Market Analysis Summary - Q4 2024

 

Key Metrics:

• Productivity growth: +1.59% YoY (nonfarm business)
• Hourly compensation: +4.31% YoY
• Unit labor costs: +2.68% YoY
• Manufacturing output: -0.31% YoY

Analysis: Labor costs are outpacing productivity gains, with compensation growing at 4.31% while productivity increased only 1.59%. Manufacturing sector shows weakness with declining output. Rising unit labor costs (+2.68%) suggest margin pressure on businesses. Labor share increase (+0.74%) indicates workers gaining larger portion of economic output.

Implications: Current trends point to wage-driven inflation pressure and potential profit margin compression for businesses. Manufacturing sector weakness warrants monitoring for broader economic impact.

The Big Picture: A Mixed Economic Landscape

 

The Total Nonfarm Private Payroll Employment grew modestly over the past year (+1.35%), signaling steady but sluggish expansion. However, this headline masks dramatic variations beneath the surface. While sectors like Construction and Leisure and Hospitality are thriving, others, such as Manufacturing, face persistent declines. Here’s a closer look at the trends shaping the job market.

---

Sector Spotlight: Growth Leaders

1. Construction (3.73% Annual Growth)

   • Why It’s Rising: Infrastructure investments, renewable energy projects, and housing demand are driving hiring.

   • Key Insight: While monthly growth is modest (+0.04%), its sustained annual performance suggests long-term stability.

2. Leisure and Hospitality (2.57% Annual Growth)

   • Post-Pandemic Rebound: This sector continues its recovery, fueled by pent-up demand for travel, dining, and entertainment.

   • Consistency: Strong growth across all metrics (0.31% monthly, 0.40% 3-month average) underscores its resilience.

3. Education and Health Services (2.36% Annual Growth)

   • Demographic Demand: Aging populations and expanded healthcare access are creating steady demand for workers.

---

Under Pressure: Sectors Facing Headwinds

1. Manufacturing (-0.61% Annual Decline)

   • Challenges: Automation, supply chain disruptions, and slowing demand for goods post-pandemic are squeezing jobs.

   • Warning Sign: Negative monthly growth (-0.10%) suggests the downturn isn’t over.

2. Information Sector (0.07% Annual Growth)

   • Volatility Alert: Despite a stellar monthly jump (+0.61%), annual growth is nearly flat. This could reflect project-based hiring (e.g., tech rollouts) rather than sustained demand.

---

The Quiet Climbers

• Natural Resources and Mining: Up 1.45% annually, likely boosted by energy sector investments and commodity price swings.

• Financial Activities: Steady but unremarkable growth (+1.14% annually), mirroring broader economic caution.

---

What’s Driving These Trends?

1. Policy and Investment: Government spending on infrastructure (Construction) and clean energy (Natural Resources) is creating jobs.

2. Consumer Shifts: Spending is pivoting from goods (hurting Manufacturing) to services (boosting Leisure and Hospitality).

3. Technological Disruption: Automation is a double-edged sword—streamlining operations but displacing workers in Manufacturing.

---

Implications for Businesses and Workers

• Job Seekers: Target high-growth sectors like Healthcare, Construction, and Hospitality for opportunities.

• Employers: In volatile sectors (e.g., Information), focus on flexible staffing models to adapt to demand swings.

• Investors: Watch for momentum in infrastructure-linked industries and caution in goods-dependent sectors.

---

The Bottom Line

The U.S. job market is a tale of two economies: services and infrastructure are thriving, while goods production and legacy industries lag. For policymakers, balancing support for declining sectors with investments in growth areas will be critical. For everyone else, adaptability is key—whether you’re hiring, job hunting, or investing.

Tariff Wars & Trade Flows: A Look at G20 Protectionism

 Introduction

Tariffs—taxes on imports—are a cornerstone of trade policy, balancing protection for domestic industries with consumer access to affordable goods. In 2023, the G20 nations, representing 80% of global GDP, showcase stark contrasts in tariff strategies. Let’s unpack their average tariff rates and what they reveal about economic priorities.

G20 Countries: Average Most-Favored-Nation (MFN) Tariff Rates

Country	Simple Avg. MFN Tariff	Weighted Avg. MFN Tariff	Key Notes
Argentina	~14.3%	~11.2%	High tariffs on autos, textiles, and agri.
Australia	~2.7%	~1.3%	Low barriers, focus on open trade.
Brazil	~13.6%	~8.0%	High industrial/agri tariffs.
Canada	~3.9%	~1.7%	Lower tariffs due to USMCA/CUSMA.
China	~9.8%	~4.1%	Reduced tariffs post-WTO accession.
France (EU)	~5.1%	~2.8%	Follows EU Common External Tariff.
Germany (EU)	~5.1%	~2.8%	Same as EU average.
India	~13.5%	~6.3%	High tariffs on electronics, autos, agri.
Indonesia	~8.3%	~4.5%	Protective tariffs on agri/consumer goods.
Italy (EU)	~5.1%	~2.8%	EU-wide tariff structure.
Japan	~4.0%	~2.1%	Low tariffs except for sensitive sectors.
Mexico	~7.0%	~3.8%	USMCA reduces tariffs with NAFTA partners.
Russia	~6.0%	~3.5%	Sanctions and trade restrictions impact.
Saudi Arabia	~5.0%	~2.7%	Low due to energy-focused economy.
South Africa	~7.2%	~3.9%	Moderate tariffs, higher on manufactured.
South Korea	~13.7%	~6.9%	High agri tariffs, low industrial.
Turkey	~10.6%	~5.2%	Protective tariffs on agri and textiles.
United Kingdom	~5.7%	~2.5%	Post-Brexit tariffs align with WTO rules.
United States	~3.3%	~1.6%	Low overall, but spikes in sectors like textiles.
European Union	~5.1%	~2.8%	Common External Tariff applies to all members.

The bar plots above highlight two key metrics:

• Simple Average: Treats all products equally.

• Weighted Average: Reflects the actual value of imports (e.g., high-value goods like semiconductors get more weight).

Top Protectors:

• Argentina (14.3%), Brazil (13.6%), and India (13.5%) lead in simple averages, shielding industries like agriculture and automobiles.

• South Korea (13.7%) surprises with high simple tariffs, driven by protections for rice and livestock.

Free-Trade Champions:

• Australia (2.7%) and United States (3.3%) maintain low barriers, prioritizing open markets.

• The EU (5.1%) and Japan (4.0%) balance protection for sensitive sectors (e.g., EU dairy, Japanese rice) with liberal industrial tariffs.

---

Why Weighted Averages Matter

Weighted averages often tell a different story:

• China’s weighted tariff drops to 4.1% (vs. 9.8% simple), as it imports high-value tech goods at low rates.

• Brazil’s weighted average (8.0%) remains high, reflecting tariffs on heavily imported machinery and chemicals.

---

Sectoral Battlegrounds

1. Agriculture:

   • India slaps tariffs as high as 150% on wine and 40% on apples.

   • The EU protects its farmers with 10–15% tariffs on grains.

2. Industrial Goods:

   • The U.S. charges just 2.5% on cars but 25% on trucks.

   • Emerging economies like Turkey impose 20%+ tariffs on textiles to boost local manufacturing.

---

Data Sources & Caveats

• Data: WTO Tariff Profiles and World Bank WITS.

• Note: 2023 figures are estimates; applied rates may differ due to trade agreements.