Input Stories

In January, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 4.1% annual gain, up from 4.0% in December. The 10-City Composite saw an annual increase of 5.3% in January, up from 5.2% the previous month, while the 20-City Composite rose 4.7% year-over-year, up from 4.5%. Among the 20 cities, New York again posted the highest annual gain at 7.7%, followed by Chicago at 7.5% and Boston at 6.6%. Tampa again exhibited the lowest annual return, with prices falling 1.5%.

On a month-over-month basis, both the U.S. National Index and 20-City Composite improved 0.1% before seasonal adjustment, and the 10-City Composite rose 0.2% pre-adjustment. Meanwhile, the 10-City and the 20-City Composites increased 0.5% after adjustment, while the U.S. National Index improved 0.6%. In 2024, the U.S. National Index advanced 4.1%, with the bulk of appreciation occurring in the first six months. Prices fell 0.7% in the second half of 2024 due to high mortgage rates and constraints on affordability. Of the cities tracked by the 20-City Composite Index, only four (New York, Chicago, Phoenix and Boston) showed price increases in the second half of the year, revealing broad cooling to prices.

Buyers and sellers are exercising more caution as affordability reaches multidecade lows in many regions, led by elevated monthly payment burdens amid already high home prices. Inventory also continues to be a challenge, especially in legacy metro areas where limited new construction constricts supply.

Consumer sentiment fell for a third month in a row in March, declining nearly 12% from February to an index reading of 57.0. The expectations index also plunged nearly 18% to 52.6. Sentiment declined across all demographic and political groups, with all groups expressing anxiety over their personal finances, business conditions, unemployment and inflation. Two-thirds of consumers anticipate unemployment will rise in the next year, the highest reading since 2009. This is notable because in recent years, strong labor markets and incomes have been the primary reason for continued durability in consumer spending.

Year-ahead inflation expectations surged for a third consecutive month in March from 4.3% to 5.0%, the highest reading since November 2022 and well above the pre-pandemic range of 2.3–3.0%. Long-run inflation expectations also soared from 3.5% to 4.1%, led by a notable rise in concerns from independents and some Republicans. Overall, aggregate sentiment has been led by independents’ views, and thus not swung by polarization across the two major parties.

The S&P Global Flash U.S. Manufacturing PMI fell slightly from 52.7 in February to 49.8 in March, dropping below the 50-point marker that signals deterioration in business conditions. Factory production declined for the first time since October 2024, with companies noting fewer instances of front-running production due to tariff fears. Slowing of new orders after two months of solid gains further depressed the Manufacturing PMI. Meanwhile, supplier delivery times shortened, indicating slightly less busy supply chains.

Overall business sentiment picked up in March, led by improvements in the service sector that offset declines in manufacturing. Optimism about future business conditions fell to the lowest point since October 2022, with companies citing weakening consumer demand and the impact of policies from the new administration. Input prices jumped in the manufacturing sector, likely due to tariff policies, but competition has limited companies’ ability to pass along costs and raise selling prices.

Manufacturing activity in the Fifth District slowed in March. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The composite manufacturing index returned to -4 from 6 in February, led by a significant drop in the shipments index. Manufacturers are also less optimistic looking ahead, with the outlook for future local business conditions falling from 2 in February to -22 in March.

Among its components, shipments decreased from 12 to -7, which led the overall drop in the composite index. New orders fell from 0 to -4. Employment declined from 9 to -1, indicating hiring dropped in March. The vendor lead time index increased from 2 to 12 in March, while the share of firms reporting backlogs grew from -6 to -1. Companies felt more pessimistic about local business conditions, with the index falling from -5 to -13. The average growth rates of prices paid increased, and the growth rate of prices received also rose, but at a slower rate. Firms still expect both price indexes to increase in the next 12 months, with a significant uptick in input prices.

Expectations for future shipments and new orders both declined but remained in positive territory, suggesting that firms still anticipate improvement in these areas over the next six months but not as much as previously expected. Expectations for backlogs fell, moving from 3 to -6 Meanwhile, firms exhibited a more cautious approach to equipment and software spending, with expectations slipping from 0 to -8. Similarly, expectations for spending on capital expenditures fell from 2 to -2. In sum, businesses in the Fifth District are growing more hesitant about the prospects for future growth.

Manufacturing activity fell modestly in the Tenth District in March, with the month-over-month composite index decreasing to -2. Meanwhile, expectations for future activity cooled but remained positive. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico. The month-over-month decrease in activity was due primarily to declines in nondurable manufacturing. Most month-over-month indexes were negative, while improved from last month. Production was relatively flat, and the employee workweek, inventories for materials, prices received and input prices were positive. On the other hand, inventories for finished goods turned negative, declining 10 points from February.

Production rose 14 points to 1, while new orders slipped from -7 to -12. Employment increased in March, rising from -14 to -4, as did the average employee workweek, turning positive from -9 to 6. The backlog of orders remained negative but improved slightly from -12 to -6. The year-over-year composite index for factory activity edged up from -18 to -7. Prices received slipped from 17 to 15 month to month but remained the same year-over-year. Prices for raw materials increased from 38 to 42 in March and from 52 to 67 from a year ago.

In March, survey respondents were asked about their firms’ profit margins and strategy changes. Nearly half of firms reported decreased profit margins in the past 12 months, while 30% reported increased margins. In the next 12 months, 33% of firms anticipate growing margins, and 40% predict reductions. Amid continued uncertainty, 66% of firms say they are considering changes in strategy, management, sourcing of materials or pricing to adapt to economic conditions this year. Additionally, selected written comments highlight how businesses are still waiting for the full impact of tariffs to hit their operations, particularly increased input costs.

Consumer confidence declined 7.2 points in March to 92.9. The Consumer Confidence Index fell for the fourth consecutive month and slipped below the expected range that has prevailed since 2022. The Present Situation Index and the Expectations Index also decreased.

The Present Situation Index, reflecting current business and labor market conditions, fell 3.6 points to 134.5. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook for income, business and labor market conditions, dropped 9.6 points to 65.2, the lowest level in 12 years and below the recession signal threshold of 80.

Of all components, only consumers’ assessments of current labor conditions improved, and only slightly, with 33.6% of consumers saying jobs were “plentiful,” in March. On the other hand, consumers’ outlook for future business conditions turned negative. Views of the current business market situation softened close to neutral, with 17.7% of consumers saying conditions were “good,” while 16.6% said conditions were “bad.” Consumers’ pessimism about future labor market and business conditions worsened to a 12-year low. Consumers’ optimism about future income also dropped after months of strong performance, as fears about the economy and labor market begin to impact personal financial expectations. February’s drop in confidence was strongest for consumers over 35 years old, with the harshest drop with consumers over 55. The decline was also broadly experienced across income groups, with the exception of those making more than $125,000.

As inflation pressures have heated up in recent months, inflation expectations likewise ticked up from 5.8% in February to 6.2% in January. Meanwhile, expectations for higher interest rates rose, with more than half of consumers (54.6%) expecting higher rates in the next 12 months. Meanwhile, consumers’ views of their current financial situation strengthen slightly from February, while future expectations dropped to the lowest level since July 2022. Expectations for a recession in the next 12 months held steady at a nine-month high, while buying plans for homes and cars declined. Perhaps due to potential higher prices from tariffs, intentions to purchase big-ticket items improved. Mentions of trade and tariffs in written responses continue to dominate, with more references than normal to economic and political uncertainty.

Building permits fell 1.2% in February and 6.8% over the year. Permits for single-family homes in February slipped 0.2% from January and declined 3.4% over the year. Meanwhile, permits for buildings with five or more units fell 4.3% from January and 15.7% over the year.

In February, housing starts surged 11.2% from January but fell 2.9% from February 2024. Similarly, starts for single-family homes soared 11.4% from January but declined 2.3% from February 2024. Meanwhile, starts for buildings with five or more units improved 12.1% from January but fell 6.6% over the year.

Meanwhile, housing completions decreased 4.0% over the month and 6.2% over the year. On the other hand, single-family home completions grew 7.1% from January but slipped 1.0% from February 2024. Completions for buildings with five or more units plummeted 20.7% over the month and 15.8% from one year ago.

Existing home sales increased 4.2% in February, but fell 1.2% from February 2024. Housing inventory grew to 1.24 million units, reflecting a 5.1% rise from January and a 17% jump from last year. The median existing home price was $398,400, up 3.8% from last year, with all four U.S. regions reporting price increases.

Single-family home sales fell 5.7% in February, with the median price increasing 3.7% from February 2024 to $402,500. Condo and co-op sales plummeted 9.8% to 370,000 units in February and were also down 9.8% from last year. Meanwhile, the median price rose 3.5% from the prior year to $355,100.

Homes were typically on the market for 42 days in February, up from 41 days in January and 38 days in February 2024. First-time buyers made up 31% of sales in February, up slightly from 28% in January and 26% in February 2024. All-cash sales accounted for 32% of transactions in February, up from 29% in January but down from 33% in February 2024. Meanwhile, investors or second-home buyers represented 16% of homes purchased in February, down from 17% in January and 21% in February 2024. Distressed sales, including foreclosures and short sales, represented 3% of purchases in February, unchanged from January and the previous year.

U.S. import prices advanced 0.4% in February, after increasing 0.4% in January, with both higher fuel and nonfuel prices contributing to the rise. Over the past year, import prices rose 2.0%. Meanwhile, U.S. export prices advanced 0.1% in February, following a 1.3% rise in January. Over the past year, export prices increased 2.1%.

Fuel import prices grew 1.7% in February, after rising 3.5% in January. These increases are attributed to higher prices for natural gas and petroleum. Prices for import fuel rose 2.8% over the past year. Import prices for petroleum advanced 1.7% in February. Meanwhile, natural gas prices surged 14.0% in February and 49.9% over the year.

Nonfuel import prices ticked up 0.3% in February and have not declined on a monthly basis since May 2024, when they fell just 0.2%. Higher prices for nonfuel industrial supplies and materials and consumer goods more than offset lower prices for capital goods in February. The price index for nonfuel imports increased 2.0% over the past year.

After declining 0.2% in January, agricultural export prices rose 0.8% in February. Over the past 12 months, agricultural export prices increased 0.6%, the largest over-the-year rise since February 2023. Meanwhile, nonagricultural export prices inched up 0.1% in February, after climbing 1.5% in January. Higher prices for consumer goods, capital goods, automotive vehicles and nonagricultural foods led the increase in February. Over the past year, nonagricultural export prices advanced 2.2%.

Manufacturing activity in New York state dropped dramatically in March, wiping out gains from the previous month. The headline general business activity index fell 25.7 points to -20.0. The new orders index declined 26.3 points to 11.4, and the shipments index dropped 22.7 points to -8.5, reflecting significant deterioration in both orders and shipments. Unfilled orders slipped to -2.0 from 1.1, while inventories inched up from 8.7 to 13.3, the highest reading in more than two years. Delivery times were little changed, dipping 4.4 points to 1.0, while supply availability improved slightly, edging up to -1.0 from -2.2.

Employment and hours worked both continued their slow decline in March, with the index for the number of employees falling from -3.6 to -4.1 and the average employee workweek slipping -1.3 to -2.5. Meanwhile, both input and selling price increases picked up, reflected in the prices paid index rising 4.7 points to 44.9, the fastest pace of increase in nearly two years, and the prices received index increasing 2.8 points to 22.4, the highest reading since May 2023.

Firms are less optimistic than they have been in previous months. The index for future business activity decreased 9.5 points to 12.7, falling for the second month in a row. Employment and the average employee workweek are forecasted to weaken, a change from expected growth in the six months ahead in February. New orders are anticipated to increase but at a slower pace than previously expected, while capital spending plans weakened. Input prices are expected to remain high. Meanwhile, supply availability is forecasted to contract slightly.