The Commerce Department reported advance U.S. retail and food services sales increased (+0.2%) to $722.7B in February, following a downwardly revised (-1.2%) decrease in January. Sales were up (+3.1%) from February 2024, and total sales for December 2024 through February 2025 were up (+3.8%) year over year. Retail sales, which are mostly goods, are not adjusted for inflation. Excluding auto dealerships and gas stations, sales were up (+0.5%). Retail trade sales increased (+0.5%) month over month and (+3.4%) year over year. Sales were mixed, with internet retail (+2.4%), health & personal care (+1.7%), and general merchandise (+0.2%) seeing increases, while gasoline stations (-1.0%), motor vehicles & parts (-0.4%), sporting goods (-0.4%), and electronics & appliances (-0.3%) declined. Restaurants, the only services category, decreased (-1.5%) in February and is up (+1.5%) year over year. Core retail sales, which exclude spending on autos, gasoline, building materials, and food services, increased (+1.0%) in February. January’s core retail sales were revised to show a (-1.0%) decrease instead of (-0.4%).

The Federal Open Market Committee (FOMC) announced that it will leave the federal funds rate within a range of 4.25% to 4.50%, the same level as in December and January, following three consecutive reductions totaling a full percentage point. The FOMC statement showed increasing uncertainty surrounding the economic outlook, replacing “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain,” with “Uncertainty around the economic outlook has increased.” The FOMC’s latest quarterly economic projections indicate that the economy is expected to grow 1.7% in 2025, 0.4 percentage points lower than December’s projection, while the unemployment rate was increased to 4.4% from 4.3%. The PCE inflation forecast was increased to 2.7% from 2.5%, while core PCE inflation was increased to 2.8% from 2.5%. The FOMC kept its forecast for two cuts in 2025, leaving the median federal funds rate at 3.9% for 2025, 3.4% for 2026, and 3.1% for 2027.

The March 2025 Manufacturing Business Outlook Survey from the Federal Reserve Bank of Philadelphia reported a mixed picture for regional manufacturing activity. As the survey reports using diffusion indices, negative readings indicate contraction, and positive ones indicate expansion. Although overall manufacturing activity has grown, key indicators showed a reduced rate of expansion. The current general activity index dropped from 18.1 to 12.5, new orders fell from 21.9 to 8.7, and shipments decreased from 26.3 to 2.0. In contrast, employment levels improved significantly, with the employment index rising from 5.3 to 19.7, the highest level since October 2022. Prices paid remained high with the index rising from 40.5 to 48.3, the fourth consecutive increase and the highest level since July '22. Firms were cautious about the future, with the future general activity diffusion index decreasing from 27.8 to 5.6 and the capital expenditures index declining from 14.0 to 13.4.