Table of Contents

• U.S. Budget Deficit

• U.S. Inflation

• U.S. Stocks

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U.S. Budget Deficit

The U.S. budget deficit surpassed $1 trillion in February, despite the fiscal year being less than halfway through. The monthly shortfall reached $307 billion, nearly 2.5 times January's deficit and 3.7% higher than February 2024. For the year, the deficit has grown to $1.15 trillion, an increase of 38% compared to the same period last year. While net interest payments on the $36.2 trillion national debt fell slightly to $74 billion for the month, total payments so far have climbed to $396 billion, making it one of the government's largest expenses. Trump has prioritized fiscal reform, creating the Department of Government Efficiency, led by Elon Musk, which has focused on government job cuts and early retirements, though its impact remains unclear. Meanwhile, Trump seeks to extend the Tax Cuts and Jobs Act, a move projected to add $3.3 trillion to the deficit over the next decade, despite claims that tax reductions will spur economic growth.

U.S. Inflation

U.S. inflation rose less than expected in February, easing some concerns about price pressures despite ongoing trade tensions and tariffs. The consumer price index (CPI) increased 0.2% for the month, bringing the annual inflation rate to 2.8%, both slightly below forecasts. Core CPI, which excludes food and energy, also rose 0.2% monthly and 3.1% annually, the lowest since April 2021. Shelter costs, a major CPI component, increased 0.3%, contributing to half of the monthly rise. Meanwhile, used car prices jumped 0.9%, apparel rose 0.6%, and food prices continued climbing, with egg prices soaring 10.4% in February. Despite inflation slowing, uncertainty remains over the impact of tariffs, with Trump’s 25% steel and aluminum duties now in effect, prompting EU retaliatory measures. The Federal Reserve is closely monitoring economic conditions but is expected to hold interest rates steady at its next meeting, with markets anticipating rate cuts later in the year. Economic growth is showing signs of strain, with the Atlanta Fed projecting a 2.4% contraction in Q1, potentially marking the first negative quarter in three years.

U.S. Stocks

The Nasdaq Composite climbed 1.22% to 17,648.45 on Wednesday, as a weaker-than-expected inflation report eased concerns about economic conditions, sparking a rebound in technology stocks. The S&P 500 gained 0.49% to 5,599.30, while the Dow Jones dipped 82 points (0.2%) to 41,350.93. Nvidia surged 6.4%, AMD gained over 4%, Tesla jumped more than 7%, and Meta rose 2%, leading the market higher. Inflation data showed consumer prices rose 0.2% in February, with annual inflation at 2.8%, both below forecasts, restoring some Federal Reserve policy flexibility. Meanwhile, Trump’s new steel and aluminum tariffs took effect, triggering retaliatory duties from Canada ($20 billion) and the EU (€26 billion/$28.33 billion). Despite the rebound, stocks remain under pressure, with the S&P 500 briefly entering correction territory, down 10% from February highs. Over the past month, the S&P 500 has declined 7%, the Dow 6.8%, and the Nasdaq 10.2%, as investors fear the economic impact of ongoing trade tensions.

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