There were some green shoots in the February report. The Commerce Department announced on Tuesday that durable goods orders declined 1.4% in February, which was significantly lower than economists’ consensus expectation of a 1.1% decline. Transportation orders declined 5.4% in February due to a 37% decline in commercial aircraft orders. It will be interesting to see if Boeing’s orders will pick up after the Iran war is concluded. Excluding transportation, durable goods orders actually rose 0.8% in February, which was higher than economists’ consensus estimate of a 0.5% increase.
Meanwhile, the Institute of Supply Management () announced that its non-manufacturing, service index slipped to 54 in March, down from a robust 56.1 in February. Any reading over 50 signals and expansion, so this is still a positive signal that the service sector is healthy. The culprits behind the decline in the ISM service index were the employment component, that decline to 45.2 in March, down from 51.8 in February, plus the business activity component, which declined to 53.9 in March, down from 59.9 in February. Overall, 13 of the 16 service industries that ISM surveyed reported an expansion in March.
There will be a update and a Consumer Price Index (CPI) announcement this week. I will be poring over the GDP details and looking for green shoots of potentially sustainable GDP acceleration from productivity gains, as well as the benefits of a shrinking trade deficit. As far as the is concerned, it is supposed to be hideous, due to recent food and energy inflation, but if the (excluding food and energy) does not rise more than 0.3%, that would be considered a positive development.
In the meantime, if you like to worry, all you have to do is read JP Morgan CEO Jamie Dimon’s annual letter. Specifically, Dimon talked about “The skunk at the party—and it could happen in 2026—would be inflation slowly going up, as opposed to slowly going down,” and then added, “This alone could cause interest rates to rise and asset prices to drop.” Dimon elaborated and explained that “Interest rates are like gravity to almost all asset prices.” He concluded by saying, “And falling asset prices at one point can change sentiment rapidly and cause a flight to cash.” So, despite the fact that Kevin Warsh is the incoming Fed Chairman, Jamie Dimon is providing interest rate guidance.
Frankly, Jamie Dimon is more influential than current Fed Chairman Jerome Powell, so it is imperative that incoming Fed Chairman Kevin Warsh asserts himself and dominates the headlines after his Senate confirmation.
In the meantime, there is a lot of confusion regarding the course of interest rates due to (1) a recent lackluster Treasury refinancing, (2) growing federal budget deficit concerns and (3) surging food and energy prices. Frankly, in the interim, it would be good if Treasury Secretary Scott Bessent could install some confidence in Treasury markets until he can hand the baton to Kevin Warsh.