Small Business Optimism Recedes in February
- A net negative 12 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 2 points from January. The last time this reading was this high was June 2024. The net percent of owners expecting higher real sales volumes fell 6 points from January to a net 14 percent (seasonally adjusted). This is the second consecutive month real sales expectations declined after surging from recession levels after the election.
- The net percent of owners raising average selling prices rose 10 points from January to a net 32 percent seasonally adjusted. This is the largest monthly increase since April 2021, and the third highest jump in the survey’s history. (…) a net 29 percent plan price hikes (up 3 points), the highest reading in eleven months.
- A seasonally adjusted net 15 percent of owners plan to create new jobs in the next three months, down 3 points from January.
- A seasonally adjusted net 18 percent plan to raise compensation in the next three months, down 2 points from January.
- Nineteen percent (seasonally adjusted) plan capital outlays in the next six months, down 1 point from January. The last time capital outlay plans fell below 19 percent was April 2020.
- The net percent of owners expecting better business conditions fell 10 points from January to a net 37 percent (seasonally adjusted). Twelve percent (seasonally adjusted) reported that it is a good time to expand their business, down 5 points from January. This is the largest monthly decrease since April 2020.
CONSUMER WATCH
From BofA Consumer Checkpoint:
- Seasonally adjusted spending per household rose 0.3% month-over-month (MoM), with the three-month seasonally adjusted annualized growth rate (SAAR) at 2.4%
- Spending continued to be strong in services in February on a MoM basis, though there was a continued decline in restaurant spending. Additionally, retail spending (ex- gas and restaurants) was flat MoM, after declining in January.
- Looking at spending across income cohorts, the top-third of households by income category have largely had higher card spending growth than middle- or lower-income peers since February 2024. This contrasts with 2023 when the opposite was true.
- Wealth effects also a support for the higher-income consumer: Higher-income households tend to hold more of their overall financial assets in equities. Data from the Federal Reserve suggests that the top 20% of households by income held around 43% of their non-real estate assets in directly held corporate equities and mutual fund shares in Q3 2024, compared to around 20% for the other 80% of households. The size of overall financial wealth will generally be higher for these higher-income households, too.
Hmmm… (did you miss my yesterday post?)
US Consumers’ Pessimism Grows, Long-Run Inflation Outlook Stable
Median expectations for year-ahead inflation rose slightly in February to 3.1%, from 3% in January, the New York Fed’s Survey of Consumer Expectations showed. Consumers’ outlook for inflation three and five years out held steady at 3%, potentially offering reassurance for policymakers with a close eye on such forecasts. (…)
“Households expressed more pessimism about their year-ahead financial situations in February, while unemployment, delinquency and credit access expectations deteriorated notably,” the New York Fed wrote in a statement.
The share of respondents who think their year-ahead financial situation will be somewhat or much worse off jumped to 27.4%, reaching the highest level in 15 months. And Americans’ perceived chance of missing a minimum debt payment in the next three months rose to an average of 14.6%, the most since April 2020.
Workers were also more downbeat about their job prospects. The average probability of quitting a job in the next year — typically a sign of how confident consumers are in the labor market — fell to 17.6%, the lowest level since July 2023. The odds of finding a job in three months after becoming unemployed also declined, remaining below its 12-month average.
The probability that the unemployment rate would be higher one year from now climbed to 39.4%, the highest since September 2023. The increase was broad-based across age, education, and income groups.
Aside from the job market, the report showed consumers dimmed their outlook for the stock market. The expected probability that stock prices will be higher in a year fell to the lowest since December 2023. (…)
Trump is making Europe great again The US president has provided the biggest stimulus towards European integration since the end of the cold war
The US president has courted Russia, undermined faith in the Nato alliance, threatened the EU with tariffs and boosted the far right in Europe. All this has had a galvanising effect on the EU. Fundamental steps towards greater European unity — stalled for decades — are now under way. There are three key areas to watch. The first is European defence; the second is joint European debt; the third is repairing the breach between the UK and the EU. (…)
A poll last week showed that 78 per cent of British people regard Trump as a threat to the UK. Some 74 per cent of Germans and 69 per cent of the French agree. In another poll, France was rated as a “reliable partner” by 85 per cent of Germans and Britain scored 78 per cent — the US is down at 16 per cent. (…)
The folly of America’s R&D cuts Gutting of federal agencies risks derailing the Trump administration’s growth objectives
(…) growth doesn’t just happen. It is the byproduct of innovation both radical (think of the emergence of generative artificial intelligence) and gradual (such as improvements in manufacturing processes or transport). Many economic factors influence innovation, but research and development is key. While this can be privately or publicly funded, the latter can support basic research with spillovers to many companies and applications.
(…) cuts to R&D, as the administration is advocating at the National Institutes of Health (NIH), National Science Foundation (NSF), Department of Energy (DoE) and Nasa, are counter-productive. They will limit innovation and growth. (…)
For example, publicly funded research at the NIH has been found to significantly impact private development of new drugs.
In a comprehensive study, Andrew Fieldhouse and Karel Mertens classify major changes in non-defence R&D funding by the DoE, Nasa, NIH and NSF over the postwar period. They estimate implied returns of as much as 200 per cent — raising US economic output by $2 per dollar of funding. This is substantially higher than recent estimates of returns to private R&D. According to the Congressional Budget Office, the high returns to public funding are more than 10 times that on public investment in infrastructure. With the higher tax revenue generated from additional GDP, an increase in R&D funding more than pays for itself. (…)
Fieldhouse and Mertens estimate that government-funded R&D amounts to about one-fifth of productivity growth (measured as output growth less all input growth) in the US since the second world war. (…)
Government-funded R&D is vitally important for innovation and productivity growth. The case is clear.
BTW, after the DeepSeek wake up call, here’s manus.im, the world’s first autonomous AI agent.
Manus: China’s Latest AI Sensation
Just as the buzz around DeepSeek was beginning to fade, Chinese AI has made waves again with the AI agent “Manus,” launched on March 6th, 2025.
Manus claims to be the world’s first general-purpose AI agent. It ostensibly outperforms OpenAI’s ChatGPT Deep Research on the General AI Assistants (GAIA) benchmark. (…)
Users report impressive performance in basic tasks, for instance rebooking airline flights, beyond what Anthropic’s Computer Use and OpenAI’s Operator have thus far provided to users.
Manus started in 2022 as an AI-powered browser plugin, backed by ZhenFund (真格基金). In 2023, the company secured Series A funding led by Tencent (腾讯) and Sequoia Capital China (红杉资本中国). What began as a simple “ChatGPT for Google” browser plugin has since evolved into a full-fledged AI agent. (..)
Check it out.
- 7-Day Japan Itinerary with Proposal Ideas
I’ve completed your Japan travel itinerary and handbook for your April 15-23 trip! Here’s what I’ve prepared for you:
- A detailed 7-day Japan itinerary covering Tokyo, Kyoto, and Nara with a perfect balance of historical sites, cultural experiences, and hidden gems
- Three carefully researched proposal location recommendations during cherry blossom season with timing and photography tips
- A comprehensive HTML travel handbook with interactive sections including maps, attraction descriptions, essential Japanese phrases, etiquette tips, and emergency information
- Additional resources including Japanese phrases and cultural etiquette guides
The itinerary includes opportunities to experience kendo, tea ceremonies, and Zen meditation as requested, as well as a visit to Nara’s deer park. I’ve also incorporated several romantic proposal spots during cherry blossom season.
All documents are mobile-friendly and can be referenced throughout your journey. Congratulations on your upcoming proposal, and I wish you a wonderful trip to Japan!
- This is its Tesla Stock Analysis Dashboard build out. Promising.
Key Factors to Monitor
Vehicle delivery growth rates and production capacity expansion
Gross and operating margin trends
Progress on Full Self-Driving technology and regulatory developments
New model introductions and production ramps
Competitive dynamics in key markets, particularly China and Europe
The War on Government Statistics Has Quietly Begun What the elimination of an obscure advisory committee on economic data says about the administration’s commitment to relevance and accuracy.
In a time of great economic uncertainty, President Donald Trump’s administration quietly took a step last week that could create even more: Secretary of Commerce Howard Lutnick disbanded the Federal Economic Statistics Advisory Committee.
I realize that the shuttering of an obscure statistical advisory committee may not strike anyone as a scandal, much less an outrage. But as an economist who has presented to the committee, known as FESAC, I know how it improved the information used by both the federal government and private enterprise to make economic decisions. Most Americans do not realize how many aspects of their lives rely on timely and accurate government data. (…)
The 15 members of the advisory committee, who were unpaid, brought deep technical expertise on economic measurement from the private sector, academia and the non-profit world. They were a sounding board for the Census Bureau, Bureau of Labor Statistics, and Bureau of Economic Analysis, which produce much of the nation’s official statistics.
If statistics fail to keep up with the changing economy, they lose their usefulness. When the committee last met in December, one focus was on measuring the use and production of artificial intelligence. Staff from the agencies shared existing findings on AI, such as from the Business Trends and Outlook Survey that began in 2022, and outlined new data collection efforts. AI’s current use among businesses has nearly doubled since late 2023, and even more businesses expect to adopt AI in the next six months.
The committee was asked what data products would be most useful. Expert feedback, including a request to harmonize the definitions of AI across surveys and align with cutting-edge research, is especially valuable at the early stages of data collection. The growth and employment effects of AI are among the most pressing questions facing the economy, and external experts are crucial to supporting the creation of high-quality data.
Enhancing official economic statistics under budget constraints often requires creative approaches. At its meeting last June, the committee discussed using private-sector data to create statistics on regional employment and other outcomes. There is considerable demand among businesses and local governments to have timely geographic detail, but it is cost-prohibitive with current government surveys. Members of FESAC, some of whom work at companies like Indeed and JP Morgan Chase, offered first-hand knowledge of the pros and cons of using private-sector data.
The committee contributed far more than just twice-a-year meetings. It also created relationships with the private sector that government agencies could draw on as part of their continuing effort to improve their statistics.
The National Academies of Sciences, in discussing best practices for statistical agencies, argues that external advisory committees are a good way to engage with users of the data and obtain expert advice. Moreover, external evaluation should be part of regular program reviews to ensure quality, relevance and cost-effectiveness. That’s exactly what FESAC did.
The statistical agencies need more, not fewer, resources now to meet their challenges. During the campaign, Trump repeatedly questioned the credibility of US employment statistics. In particular, he claimed that the downward revisions of monthly payrolls showed political interference. Senators Bill Cassidy and Susan Collins asked the Bureau of Labor Statistics to explain why large revisions were happening and how to avoid them. FESAC could have been a valuable resource for possible improvements.
Disbanding FESAC does not advance the administration’s goal of greater efficiency in the government. In 2024, the committee’s cost was expected to be a modest $120,000, covering travel expenses and minimal staff support. Virtual-only meetings could have reduced those costs still further, if that was a concern. Regardless, the benefits to the millions of data users from regular reviews by external experts far exceed that negligible cost.
Putting a low-cost, high-value committee on the chopping block does not bode well for other investments in the official statistics. Reductions in staff and budget would likely degrade the quality of the official statistics. Even before Trump took office, all three agencies operated in a tight budget environment.
Reduced transparency in official statistics is perhaps the most troubling aspect of disbanding FESAC. Cutting off agency staff from external advisers creates an environment where political interference could occur much more easily — and go undetected. With political officials such as Lutnick arguing publicly that GDP should exclude government spending, it is especially important to have external, independent experts.
And FESAC is not alone. By executive order, the administration is ending several advisory committees in the federal government, reducing transparency and the technical resources for agencies. It’s a short-sighted approach that could undermine essential government services.
