Nomura: US Economics Weekly — Ceasefire or Consequences
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Nomura's latest weekly economic report assesses the fragile ceasefire between the United States and Iran, alongside recent softer inflation data and mixed consumer signals. March core CPI rose by a modest 0.196% month-over-month, coming in below both Nomura's 0.286% forecast and the market consensus of 0.3%. The downside surprise was primarily driven by weaker prices for used vehicles and prescription drugs. Consequently, Nomura revised its March core Personal Consumption Expenditures tracking estimate down to 0.187% monthly, resulting in a 3.060% year-over-year rate.
Despite a sharp 21.2% monthly surge in gasoline prices, household food costs unexpectedly fell 0.2%. Consumer spending is clearly losing momentum, with high-frequency indicators weakening and the University of Michigan consumer sentiment index plunging to its lowest level in over 70 years. However, underlying consumer fundamentals remain healthy. Labor market data shows considerable strength, with ADP weekly data indicating record private employment growth and continuing unemployment claims dropping to 1.794 million, the lowest since May 2024. Minutes from the March Federal Open Market Committee meeting revealed a hawkish tone, with most participants noting upside inflation risks. Nomura maintained its first-quarter gross domestic product tracking estimate at a 2.1% annualized rate.