Member Briefing February 26, 2025
Mid-Atlantic Factory Gauge Rebounds In February
Fifth District manufacturing activity improved somewhat in February, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite manufacturing index increased to 6 in February from −4 in January, led by a notable increase, from −9 to 12, in the shipments index. Of its other two component indexes, new orders increased slightly to 0, and employment rose to 9 from 3. The Report covers activity in the states of Maryland, Virginia, West Virginia, North Carolina, South Carolina and the District of Columbia.
The local business conditions index remained at −5 in February, while the index for future local business conditions fell from 32 to 2. The future indexes for shipments and new orders also decreased substantially, to 13 and 8, respectively. The vendor lead time index decreased to 2 in February, while the backlog of orders index was nearly unchanged at −6. The average growth rates of prices paid edged down, while the average growth rate of prices received rose slightly in February. Firms expected growth in both prices paid and prices received to increase over the next 12 months
Consumer Confidence Drops To an Eight-Month Low
The Conference Board's consumer confidence index dropped 7 points, the biggest decline since August 2021, to 98.3 this month. Economists polled by Reuters had forecast the index falling to only 102.5. The third straight monthly decrease pushed the index to the lowest level since June 2024. It is now at the bottom of the range that has prevailed since 2022. The cutoff date for the survey was February 19. Confidence slumped across all age groups, with sharp decreases in the 35-55 age cohort. Nearly all income groups reported a decline, with the exception of households earning less than $15,000 a year and between $100,000–125,000.
The Conference Board survey on Tuesday noted that "comments on the current administration and its policies dominated the responses." It followed on the heels of surveys last week showing steep declines in business and consumer sentiment in February. Tariffs on imports, which Trump has already imposed or is planning to, have been singled out as the major issue in almost every survey of households and businesses. The share of consumers planning to buy motor vehicles over the next six months dipped. Buying intentions for big-ticket items like washing machines, televisions and electronics fell. Planned outlays on services were little changed. Consumers' average 12-month inflation expectations jumped to 6%, the highest since May 2023, from 5.2% last month.
Household Debt Balances Continue Steady Increase; Delinquency Elevated for Auto and Credit Cards
The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit. The report shows total household debt increased by $93 billion (0.5%) in Q4 2024, to $18.04 trillion. The report is based on data from the New York Fed’s nationally representative Consumer Credit Panel. It includes a one-page summary of key takeaways and their supporting data points. “While mortgage delinquency rates are similar to pre-pandemic levels, auto loan delinquency transition rates remain elevated.” said Wilbert van der Klaauw, Economic Research Advisor at the New York Fed. “High auto loan delinquency rates are broad-based across credit scores and income levels.”
- Credit card balances increased by $45 billion from the previous quarter and reached $1.21 trillion at the end of December 2024.
- Auto loan balances saw a $11 billion increase and stood at $1.66 trillion.
- Mortgage balances increased by $11 billion and currently stand at $12.61 trillion.
- HELOC balances rose by $9 billion to $396 billion, representing the eleventh consecutive quarterly increase since Q1 2022.
- Other balances, which include retail cards and other consumer loans, grew by $8 billion. Student loan balances grew by $9 billion, and now stand at $1.62 trillion.
Global Headlines
Middle East
- Iran Will Not Yield To U.S. 'Pressure And Sanctions' On Nuclear Dispute – Reuters
- Israel Sends Tanks Into West Bank For First Time In Decades, Says Fleeing Palestinians Can't Return - NBC
- National Dialogue A 'Historic Opportunity' For Syria, Interim President Says - Reuters
- Hamas Says No Gaza Ceasefire Talks Unless Israel Releases Prisoners - BBC
- Israel Looks To Extend Phase One Of Gaza Truce As Long-Term Deal Proves Elusive - Reuters
- Houthis Target US Fighter Jet, Drone With SAM Missiles For First Time - Fox
- Israel Demands Complete Demilitarisation Of Southern Syria - BBC
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Russia’s Withering Economy Is a Tricky Place to Do Deals—Even for Trump – WSJ
- Media Report Estimates 95,000 Russian Troop Deaths So Far In Ukraine – France 24
- UK Defence Spending To Rise To 2.5% Of GDP By 2027, Funded By Cut In International Aid - BBC
- Russia's Coal Industry Suffers Blow As Economic Troubles Worsen - Newsweek
- State Department Officials Pushing To Release More Frozen Ukraine Funds – Politico
- Trump Has Changed Ukraine Conversation ‘For The Better’, Starmer Says - BBC
- Kremlin Disputes Trump's Claim About Ukraine Peacekeepers - NBC
- Trump Teases Ukraine Deal Amid Russia Pivot – The Hill
- Can Europe Replace The US In Ukraine? - Politico
- Without U.S. Aid, Ukraine Would Lose Some of Its Most Sophisticated Weapons - WSJ
- Interactive Map: Assessed Control Of Terrain In Ukraine – Institute For The Study Of War
- Map – Tracking Russia’s Invasion Of Ukraine – Live Universal Awareness Map
Other Headlines
- Taiwan Detains Ship and Chinese Crew After Undersea Cable Severed - WSJ
- Power Outage Hits Swaths Of Chile, From Largest Copper Mine To Santiago Streets – Reuters
- Australia Releases Photos of Chinese Warships Near Coast - Newsweek
- Cook Islands PM Faces No-Confidence Vote After Contentious China Deals – Benar News
- Who Is Friedrich Merz? Meet Europe’s Most Powerful Leader As US Turns Its Back - Politico
- Pope Francis Health: Vatican Issues Tuesday Morning Update - Newsweek
- Congo Weighs Cobalt Export Quotas To Revive Prices Amid Supply Glut - Reuters
- Europe Must Confront Soaring Chronic Disease Rates, Warns WHO - Politico
- Argentina’s $4.6 Billion Crypto Scandal; Largest-Ever Crypto Theft – Forbes
Policy and Politics
House GOP Adopts Trump Budget After Topsy-Turvy Night
House Republicans adopted the budget resolution that will lay the foundation for enacting President Trump’s legislative agenda Tuesday night, just minutes after they initially pulled the measure from the floor. The legislation was approved in a 217-215 vote. It capped a wild evening in the House chamber that saw Republican leaders hold open an unrelated vote for more than an hour to buy time to win over holdouts, announce they were canceling a vote on the legislation, and reverse course just 10 minutes later. Republicans are looking to use a process known as budget reconciliation to enact Trump’s priorities, which would allow the party to circumvent Democratic opposition in the Senate.
The tally also marked a dramatic turnaround for Speaker Mike Johnson (R-La.) and House GOP leaders, who hours earlier were facing opposition to the measure from four deficit hawks, skepticism among some other hardliners. Trump, who has advocated for the House’s approach over the Senate’s, provided an 11th-hour boost, working the holdouts on the phone ahead of the vote.
New York Comptroller: Financial Environment May Cause Budget Challenges For Local Governments
It’s budget time in New York, and local governments may face increased budget challenges this year. According to DiNapoli, federal stimulus during the COVID-19 pandemic from the CARES Act of 2020, American Rescue Plan of 2021 provided the fastest growing source of revenue for local governments during that time, and they were required to obligate by the end of 2024 and spend by the end of 2026. The report said outside of New York City, counties received the most federal stimulus funds in terms of overall dollars, while American Rescue Plan funds represented 14.4% of total 2019 (pre-pandemic) revenues for cities, 5.3% for towns, 4.5% for counties and 3.2% for villages.
Regarding state aid, the Aid and Incentives for Municipalities (AIM) program represents the largest amount of unrestricted state aid to local governments, and is used by cities to pay for things like supplies and wages for police officers and firefighters. DiNapoli said when adjusting for inflation, AIM funding has declined nearly 30% over the past 15 years, and is now worth less to local governments than what they received in fiscal year 2004-05, the year before the AIM program started. Another factor the report found is local sales tax. For most of 2021 and in part of 2022, local governments outside of New York City saw double-digit year-over-year percentage increases in local sales tax collections after experiencing a 19% decline during the height of the pandemic. Earlier this month, the comptroller’s office reported that sales tax collections in New York state increased by 1.6% in 2024, the slowest annual growth since 2020.
Read more at NY State of Politics
Falling Treasury Yields Signal That Trump Policies Are Starting To Spook Investors
U.S. government debt rallied aggressively overnight and into Tuesday’s trading session, pushing yields below key technical levels in a way that appeared to be shaking confidence in the broader market. The 10-year yield, which falls when there’s buying demand for the underlying government note, broke below its 100-day moving average of 4.379% before continuing to drop, according to BMO Capital Markets strategists Vail Hartman and Ian Lyngen. The rate has dropped to as low as 4.283% and, according to FactSet data, is also below its 50-day moving average and headed for its 200-day moving average.
Helping to explain the aggressive bond-market rally unfolding on Tuesday is a somewhat different take on the risk-off narrative that played out over recent sessions. While Friday’s session was marked by concerns about the strength of the U.S. economy following a batch of weak data, Monday’s trading appeared to be dominated by worries about stagflation, or an unwelcome mix of stagnating growth and elevated inflation. Now these concerns are encompassing worries about the rest of the world, the potential for an economic contraction domestically, or both.
Trump’s First 100 Days
- Musk Gives Federal Workers A 'Second Chance' To Defend Their Jobs Or Get Fired – Reuters
- White House Says Follow Agency Heads, Not Musk, On Employee Directive – The Hill
- More Than 20 Staffers Quit Musk’s DOGE, Refusing To ‘Dismantle Critical Public Services’ – France 24
- Musk To Join Trump’s First White House Cabinet Meeting – The Hill
- Donald Trump Issues Keystone Pipeline Update: 'Almost Immediate Start!' - Newsweek
- Dan Bongino Called the FBI ‘Irredeemably Corrupt.’ Now He’ll Help Run It. - WSJ
- Fired Yosemite Workers Say Upside-Down U.S. Flag Was A Call To Protect Public Lands - NBC
- Full List of Social Security Offices Closing After DOGE Cuts - Newsweek
- The Trump Tracker: Keep Tabs On The Latest Announcements And Executive Orders - WSJ
- Tracking Trump’s Cabinet Confirmations - NYT
Health and Wellness
Flu Vaccine This Season May Be Poorly Matched, Early CDC Data Suggests
his season's influenza vaccine may have been a poor match to a strain of the flu virus that caused many infections this winter, early data released by the Centers for Disease Control and Prevention suggests. The CDC's latest data come as much of the U.S. is finally seeing signs of a slowdown in influenza activity after waves of illness this past fall and winter that climbed to the worst rates recorded from hospitals and doctor's offices since the 2009 swine flu pandemic. Up to 910,000 hospitalizations are estimated to have been caused by the flu since October 2024, which puts the season on track to be the most severe in at least a decade.
Many of the flu viruses that the CDC has tested this season were "well-recognized" by antibodies targeted to the vaccine, which helps the body fight off the infection, the agency reported this month. The testing is done using antibodies from ferrets, which have similar influenza symptoms to humans. But against the H3N2 strain of influenza, which this season has made up just over half of the influenza A viruses scrutinized by the agency, only around 50.9% of the samples were "well-recognized" by the antibodies.
Industry News
Trump Says Tariffs On Canada And Mexico ‘Will Go Forward’
President Donald Trump said Monday that his tariffs on Canada and Mexico are starting next month, ending a monthlong suspension on the planned import taxes that could potentially hurt economic growth and worsen inflation. While Trump was answering a specific question about the taxes to be charged on America’s two largest trading partners, the U.S. president also stressed more broadly that his intended “reciprocal” tariffs were on schedule to begin as soon as April.
Despite talks the Trump administration has held with Canadian and Mexican officials, the U.S. president signaled Monday that he would end the 30-day suspension of tariffs that were initially set to take effect in February. Trump plans to tax imports from Mexico at 25% as well as most goods from Canada, with energy products such as Canadian oil and electricity being tariffed at a lower 10%. Mexican President Claudia Sheinbaum appeared confident Monday that her administration would reach agreements with the U.S. government before the deadline set by Trump. If necessary, she said she would seek to speak directly with Trump again.
How Trump’s Tariffs On Mexico And Canada Will Sweep Across The U.S., State By State
The sweeping U.S. tariffs on imports from Canada and Mexico are coming next week according to President Trump. The tariffs “will go forward” when a monthlong delay expires, Trump said on Monday, and they will begin “on time, on schedule.” If the U.S. follows through, the impact on economies across the U.S. will be extensive, though it will vary greatly state to state. The biggest state economies, not surprisingly, will be hit the hardest in absolute dollar values, Texas and California. But many states have massive exposure to trade from the two North American economic partners and will experience shocks to local economics, on top of the ongoing hit from tariffs on China.
LendingTree recently ran an analysis of all 50 states. The lending site ran the analysis because tariffs directly affect prices, which in turn impact consumers’ finances, and it wanted to to determine where consumers are most vulnerable at a time when inflation is already straining American wallets. Its report shows wide disparities between the states, with some like Montana doing a vast majority of their trade with Canada, China, and Mexico, while others do surprisingly little.
Read more and view the maps at CNBC
Cleveland-Cliff’s CEO Goncalves Sees ‘Significant Uptick’ in Market, Leaves Door Wide Open For More M&A
Cleveland-Cliffs Inc. has started 2025 in much better fashion than how it ended last year, Chairman, President and CEO Lourenco Goncalves told analysts Feb. 25 after he and his team reported a fourth-quarter net loss of $434 million. The company posted a fourth-quarter operating loss of $465 million on revenues of more than $4.3 billion; in the same period of 2023, those numbers were a loss of $100 million and $5.1 billion, respectively. The company shipped about 3,800 net tons of steel products during the quarter, down from a little more than 4,000 in late 2023.
On a conference call discussing those results and his outlook, Goncalves pointed to lower U.S. automobile production and price cuts from several competitors—including some peers he accused of “domestic dumping”—as drivers of those losses. But he also looked to spin things forward with a more positive view: Cliffs’ acquisition last fall of Canada’s Stelco Holdings Inc. has lowered the company’s exposure to the auto sector and increased its ability to capitalize on rising spot prices, he said. On top of that, “the market is certainly pointing in our favor” as prices for scrap and hot-rolled coil steel have risen smartly in recent weeks and automotive and other customers have beefed up their orders with Cliffs.
Boeing Layoffs Now Exceed 5,000
Boeing Corp. recently filed new Worker Adjustment and Retraining Notification (WARN) Act notices for employees at Huntsville, Ala., and North Charleston, S.C., as it proceeds with the organization-wide downsizing it announced last fall. The latest reductions indicated for those locations will take place by April 4. At the Huntsville location, which is a design and manufacturing center for missile and weapons systems, Boeing notified the state of 71 layoffs pending. The same plant laid off 158 employees in January. In South Carolina, where Boeing assembles the 787 Dreamliner aircraft, 77 positions have been listed for termination in early April. That plant had implemented 279 layoffs in January and February.
In October 2024, Boeing CEO Kelly Ortberg announced a far-reaching reorganization of the commercial and military aircraft builder, a program that would reduce overall employment by 10%, or roughly 17,000 employees. It’s unclear whether or not that figure remains the target for job reductions. To date, since December 2024 Boeing has identified 5,080 positions for elimination.
Read more at American Machinist
Japanese Auto Industry Seeks Government Help Against US Tariffs
Japan's automobile industry association urged the government on Tuesday to try to shield Japanese automakers from tariffs that the United States may impose on imports of autos and parts. The Japan Automobile Manufacturers' Association is worried about damage to the economies of both countries if U.S. President Donald Trump's administration proceeds with hefty tariffs on auto imports from Japan, Mexico and Canada, JAMA Chairman Masanori Katayama said. Katayama, also chairman of Isuzu Motors, made his remarks at the start of a meeting with Trade and Industry Minister Yoji Muto in Tokyo. Top executives from automakers such as Toyota, Honda and Nissan were also present.
During the meeting, which was closed to media, auto industry executives expressed worries about not being able to pass on higher costs from higher U.S. tariffs and about their economic fallout, Muto told reporters afterwards. Muto met separately with representatives from Japan's steel and aluminum industries about the tariff issue earlier on Tuesday. Japan Iron and Steel Federation Chairman Tadashi Imai, also president of Nippon Steel, told reporters before that meeting that the organisation's main concern was that the global steel market may be depressed further if protectionism spreads.
Home Depot Earnings Beat Wall Street Estimates, As Retailer Breaks Comparable Sales Losing Streak
Home Depot on Tuesday topped Wall Street’s quarterly sales expectations, even as elevated interest rates and housing prices dampened consumer demand for large remodels and pricier projects. For the full year ahead, the company said it expects total sales to grow by 2.8% and comparable sales, which take out the impact of one-time factors like store openings and calendar differences, to increase by about 1%. Home Depot projected adjusted earnings per share will decline about 2% compared with the prior year. Home Depot anticipates consumers will stop putting off projects as they gradually get used to higher interest rates, rather than waiting for them to fall.
For the fiscal fourth quarter Home Depot earnings per share were $3.02 vs. $3.01 expected and revenue was $39.70 billion vs. $39.16 billion expected. In the three-month period that ended Feb. 2, Home Depot’s net income climbed to $3.0 billion, or $3.02 per share, from $2.80 billion, or $2.82 per share, in the year-ago period. Revenue rose 14% from $34.79 billion in the year-ago period. Comparable sales, a metric also known as same-store sales, increased 0.8% across the company.
Consumer Reports’ Top 10 Vehicle Picks Prioritize Price Point, Hybrid Options
Consumer Reports' latest top picks list suggests you don't need to spend top dollar for a reliable vehicle. The average new car price in the U.S. was $48,641 in January, up 1.3% from the previous year, according to Kelley Blue Book. Consumer Reports’ most recent top cars, trucks and SUVs list highlights several 2025 model-year vehicles that put less strain on the pocketbook, with the most affordable’s suggested retail price starting at $21,590.
Another ongoing trend from Consumer Reports' top picks list for 2025: hybrid vehicles. This year’s list has hybrids in six of the 10 categories, including three plug-in hybrid models. reliability, fuel economy, quiet cabins and acceleration speeds have helped hybrids perform well in testing. And while these models can be more expensive than their gas-engine counterparts, Alex Knizek, associate director of auto test development for Consumer Reports said the price gap has narrowed in recent years. Consumer Reports’ list is determined by annual testing of about 50 new vehicles. Each vehicle is purchased anonymously at dealerships, and more than 50 tests are conducted after a 2,000-mile break-in period. Reliability and satisfaction surveys from members also factor into the analysis.
Read more and see the top 10 at USA Today
Palisades Nuclear Plant Signs Agreement To Build First Of Its Kind Small Modular Reactors In Michigan
A closed nuclear plant on the shores of Lake Michigan is aiming to build the first small modular reactor in the U.S. by 2030. The owner of the Palisades nuclear plant, Holtec International, signed a strategic agreement with Hyundai Engineering and Construction on Tuesday to build a 10 gigawatt fleet of small modular reactors in the North America, starting with two units at the Palisades site. Holtec is aiming to bring the original Palisades reactor back online in October subject to approval by the Nuclear Regulatory Commission. It would be the first restart of a closed nuclear plant in U.S. history.
Holtec’s small modular reactor design has not been licensed by the NRC yet. There are no operational small modular reactors in the U.S. Holtec is one of many companies that hope to receive approval from federal regulators to build such reactors. Holtec’s design aims to reduce the capital costs and long construction timelines that have plagued large nuclear projects. The nuclear industry hopes such reactors will create greater flexibility in where plants can be built, and reduce construction costs by prefabricating components and then assembling them on the site.