The ISM Manufacturing PMI dropped 1.3pt to 49pts, returning to the contractionary territory after two months above the neutral level of 50. The survey highlighted a rapid decline in demand, with the new orders index falling 3.4pt to only 45.2, the lowest level in almost two years and almost 10pts below the level only two months ago.
Other major components reinforced the message of weakening demand, with companies reporting declining production volumes, falling headcount and rising inventories. Manufacturers also reported a sharp increase in prices due to rising import tariffs -- the prices component was up 7pt to 69.4, the highest since mid-2022.
JOLTS Job Openings suggested that conditions in the US labour market eased slightly in February. The latest data showed a 194k decline to 7.57mn, a level close to the average over the last six months and almost fully reversing the rise at the start of the year.
The ratio of vacancies to unemployment – an indicator of labour market tightness closely followed by the FOMC – signalled a meaningful softening dropping from 1.13 to 1.07, the lowest level in five months. Layoff and quits rates were unchanged at 1.1% and 2.0% respectively.
The preliminary estimate for March showed euro area HICP inflation eased for a second consecutive month, by 0.1ppt to 2.2%yr. The decline left the Q1 average rate at 2.3%yr, in line with the latest ECB forecast.
Looking at major components, the disinflationary impulse came from energy price inflation, which dropped by almost 1ppt to -0.7%yr, and core services prices, closely followed by the ECB as an indicator of domestic price pressures. Inflation in the latter category eased by 0.3ppt to 3.4%yr. Alongside stable core goods inflation, at 0.6%yr, they left the core rate falling by 0.2ppt to 2.4%yr.
The RBA kept rates steady at its most recent meeting, the first with the new monetary policy board. Much of the statement spoke to uncertainty around the global outlook and the need for greater confidence before making their next move. We expected that their confidence will strengthen on the outlook for inflation with the Q1 inflation print. This will allow them to cut rates by 25bps to 3.85% in the May meeting. Our detailed commentary on this meeting can be found here.
Retail Sales rose 0.2% in February led by food retailing.
Meanwhile, non-food retail declined for a second consecutive month as the post-sales consumer blues continue. Annual growth slowed to 3.6%yr. Retail trade declined -0.4%mth in Qld, while Vic posted a flat result. Trends were positive in the remaining states with WA recording its 14th consecutive lift. Any impacts from Cyclone Alfred will show through in March figures. The nominal prints for January and February hint at a weaker Q1 2025 volumes result.
The CoreLogic home value index rose a further 0.4% in March, the second monthly gain following four consecutive monthly declines. Annual price growth slowed to 2.8%yr but now looks likely to bottom out around 1.5% later this year. Preliminary estimates of turnover volumes were on the weak side, even allowing for likely upward revisions. With some up-lift showing through in new listings, the mix may limit the extent to which price gains are sustained.
