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North America Economic Research Summary

J.P. Morgan's latest report analyzes key economic indicators and regional dynamics as of April 11, 2025:

1. Economic Outlook: The positive outlook on retaliatory tariffs abroad has shifted; trade disruptions are narrower and more focused. Recent risk markets saw a substantial rebound, but a significant offset in US long bond yields and weak USD are noted. A mild recession forecast was upgraded to 2025Q4 GDP flat (formerly -0.3%) and peak unemployment to 5.2% early next year. High average tariff rates (~$300 billion/year effective tax increase) highlight substantial risks.

2. GDP & Inflation Forecast: 2025 core PCE price deflator projected at 2.5% year-over-year, lowest since March 2021. 2025Q4/Q4 GDP projected flat vs. prior -0.3%. Industrial production forecast to peak at 5.2% early next year (previously 5.3%). Core PCE year-over-year eased to 3.3% from 3.5% (previously 3.9% projected). Fed slightly delayed first rate cut to Sept 2025.

3. Recent Events: Auto tariffs phased in mid-April; this led to strong March auto sales spurs noted, potentially front-loading consumption in Q2 but heightening business uncertainty. Reciprocal tariffs (125% China, 10% others till July) adjusted further; the partial pause on April 9 slowed the front-loading timeline but not completely. Tariffs implemented in Feb/Mar remain in place.

4. Inflation: March CPI rose 0.06% m/m (smallest increase since start of 2021, year-over-year 2.8%); headline fell 0.1% due to energy decline (-0.4%) & food decline (-0.2%). PPI data similarly softened in March (final demand index -0.4%, core ex food energy -0.1%). Expectations surged for the 1-year rate (to 6.7% vs. 5.0%) and 5-10yr rate (to 4.4% vs. 4.1%). Michigan sentiment slumped to 50.8 vs 57.0; expectations fell sharply.
   Front-loading could boost Q2, but uncertainty may curtail investment. Core services surprisingly robust (+0.1% m/m); goods softer (-0.1%).
   Notably, tariff-induced price increases may be deferred as firms absorb costs, impacting future goods inflation trajectory. Used vehicles prices may be temporarily lower due to pre-buying. Core goods excluding food/inventory fell sharply (-0.7% used cars, -1.1% medical commodities record fall).
   Auto tariffs (mid-April) are a major inflation driver ahead. Services only saw core CPI rise 0.1%. Sentiment is down 31% from post-election peak after strong post-election bounce.

5. Fed Policy: Fed patience noted due to lower headline inflation; still expects patient policy making given elevated future inflation pressures. 1st rate cut still expected in 2025 but pushed back to September from June. Retail Sales also pushed back expectations to 1.4% m/m vs previous draw down, citing front-loaded auto purchases and tariffs.

6. Industrial Production & Inventories: March expected -0.1% m/m due to Utilities (-) & Autos (-). Established July 4 deadline by House; Senate resolution allows huge potential deficit ($5.8T over 10 years); enactors yet to agree on actual spending cuts. Businesses cautious on capex due to high tariffs and prospect of State/Gov efficiency actions. Tariff front-loading further likely explains current retail survey decline.

7. Trade Services Component: Explained the softer core PPI reading; wholesalers/retailers absorbed tariff costs with lower margins (+0.2% auto sales, prior month). This helps explain also the NAHB survey decline (HMI likely to drop to 37 from 39).

8. National Association of Home Builders (NAHB) Housing Market Index: Expected to fall to 37 in April ("good for economy decline"), though still relatively positive. Back-to-back declines signal significant weakening.

9. Philadelphia Fed Manufacturing Survey: Expected to drop to -0.9 from +21.4 in March (-21.4 points month change). Despite strong prior readings, even elevated inventories could prevent progress. ongoing tariff disruptions provide an explanation. See PPI missing from context

10. Job Market: Claims (225k) expected slight increase, Continuing Claims stable. Unemployment insurance claims rising specifically among recent immigrants following administration communications. Losing work authorization, especially quickly for those already in country or from CBP One app, poses a jobs problem.

This summary synthesizes key macroeconomic topics, forecasts, and recent event impacts reported by J.P. Morgan on April 11, 2025, excluding paratextual elements like contact information, survey components, data sources, or boilerplate footers (like "Analysts' Compensation", "Other Disclosures", country-specific regulations).