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USDA sharply raises food price forecast, driven by retail egg prices... USDA forecasts prices for all food will rise 3.4% this year, up from the expected 2.3% increase last month. The monthly price increase was driven by food-at-home (grocery) prices, which are anticipated to rise 3.3%, up from the 1.3% gain forecast last month. Food-away-from-home (restaurant) prices are projected to increase 3.4%, down from 3.6% previously.
The jump in grocery prices was driven by eggs, which are projected to surge 41.1% this year, up sharply from the expected 20.3% increase forecast last month. Surging and volatile egg prices are tied to the outbreak of highly pathogenic avian influenza, which has sharply reduced layer flocks and egg production.
USDA projects price increases of 3.2% for beef and 1.2% for pork this year. Poultry prices are expected to show no change from year-ago.
House GOP weighs budget cuts amid farm bill concerns... House Ag Committee Republicans met Monday night to discuss reconciliation plans and short-term priorities, amid growing concerns over the impact of proposed budget cuts on the farm bill and nutrition assistance programs.
- Budget cuts & SNAP: The GOP plan includes $230 billion in agriculture cuts over 10 years, raising concerns about potential reductions to the Supplemental Nutrition Assistance Program (SNAP).
- Farm bill uncertainty: Lawmakers worry these cuts could complicate passing a new farm bill before midterm elections.
- Balancing act: Some Republicans emphasize the challenge of trimming spending while preserving farm policy funding.
- Thrifty Food Plan limits: The GOP is considering restrictions on future changes to the Thrifty Food Plan to curb SNAP spending.
Challenges:
- Bridging differences between House and Senate approaches.
- Addressing moderate Republican concerns over social safety net cuts.
- Navigating a tight legislative timeline for both reconciliation and the farm bill.
U.S. consumer confidence slumps by most since 2021... U.S. consumer confidence fell the most since August 2021 on concerns about the outlook for the broader economy. The Conference Board’s gauge of confidence decreased 7 points in February to 98.3, marking the third straight decline. A measure of expectations for the next six months also fell by the most in three-and-a-half years, while a gauge of present conditions declined more modestly.
Consumers were more pessimistic about current and future labor-market conditions, as well as the outlook for incomes and business conditions. Perceptions of present and future financial situations worsened, and the share of respondents expecting a recession in the next year rose to a nine-month high.
Why Are Investors Worried About Washington?... Tom Essaye of The Sevens Report highlights that last week’s market declines were driven by uncertainty in Washington. Investors had expected a pro-business, pro-growth agenda under the Republican-controlled government, but instead, policy chaos has emerged as a headwind. Essaye identifies four key areas of concern:
- Tariffs and Trade Uncertainty. Investors remain in the dark about the extent and size of looming tariffs on major trade partners, including Canada, Mexico and the EU. “The spontaneous nature of the tariff threats has led investors to worry that even currently well-regarded trade partners aren’t safe from potential threats,” Essaye writes. This lack of a clear trade policy creates instability in markets.
- Federal Workforce Shakeup. The administration’s efforts to reform the federal workforce have rattled employees and contractors, causing them to pull back on spending. Essaye notes that while federal employees make up only about 1% of the total U.S. workforce, their uncertain job status creates an economic drag: “They can impact corporate earnings and other metrics, and the uncertainty... is a headwind on growth.”
- Government Shutdown Risk. The current funding resolution expires on March 14. Despite Republican control of Congress, there’s no agreement on a spending plan. While a shutdown is unlikely, Essaye warns, “If this stretches to an 11th-hour drama, it will add another growth headwind.”
- Debt Ceiling and Tax Cuts Stalemate. Congress needs to extend the debt ceiling and pass tax cut extensions, but Republican lawmakers remain divided. The House and Senate differ on whether to tackle these issues in one or two bills, creating further uncertainty. Essaye emphasizes, “The longer this drags on, the more that uncertainty will weigh on markets.”
Bottom line: Investors had hoped for pro-growth policies, but instead, they are facing trade turmoil, bureaucratic disruptions and legislative gridlock. However, Essaye remains cautiously optimistic: “One party in control seldom willingly does things to negatively impact growth... While we could be in for more near-term declines on policy chaos, it’s not to the point yet where we need to view Washington as a structural headwind on the markets or the economy.”
Beijing’s economic playbook meets U.S. uncertainty... China’s National People’s Congress kicks off on March 5, with Premier Li Qiang set to outline economic targets amid global uncertainty fueled by U.S. tariff threats. Economists anticipate a 5% GDP target, a reduced 2% consumer inflation goal and an expanded fiscal deficit to stimulate domestic growth. Key spending areas may include consumer goods, infrastructure and financial sector support. However, with U.S. trade investigations looming in April, Beijing’s real policy response may come later, at the Politburo meeting.
Canada’s growth at risk amid trade war fears... Economists are lowering their forecasts for Canada’s economic growth, citing concerns over a potential trade battle with the United States. A tariff war between the two countries could shrink Canadian output by nearly 3% over two years, effectively erasing growth during that period. Additionally, it could reduce long-term growth potential by 2.5%, as businesses scale back investments.
Fed’s Logan proposes discount-window loan auction facility... Dallas Federal Reserve Bank President Lorie Logan suggested allocating a small portion of the Fed’s balance sheet to loans and repos, potentially through a daily auction of discount-window loans. Speaking at a Bank of England conference, Logan argued that such a facility could improve liquidity distribution among banks and enhance policy efficiency. She emphasized that borrowing from the Fed should be normalized rather than seen as a last resort. However, she clarified that the Fed is not currently considering changes to its implementation framework.