Reinhart Week in Review by Madison Investments 02.14.2025

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INFLATION

The Consumer Price Index (CPI) rose 0.5% in January. The core CPI, excluding food and energy, rose 0.4%.  Year-over-year, consumer prices are up 3.0%, while core CPI has risen 3.3%. Producer prices (PPI) were up 0.4% in January and are up 3.5% over the last twelve months.

Our Take: While seasonal effects can distort the CPI, inflation remains stubbornly high, and progress toward the Fed’s 2% target appears to have stalled. Higher inflation coupled with uncertainty surrounding government decisions on tariffs, taxes, and spending all but eliminates the likelihood of rate cuts in the near future.

 

RETAIL SALES

Retail sales fell 0.9% in January, dramatically underperforming expectations for just a 0.2% decrease. The retail sales control group, which feeds GDP calculations, decreased 0.8% versus expectations of a 0.3% increase.

Our Take: Retail sales significantly missed the mark in January. Bad weather and wildfires, along with upward revisions to the December report, may have affected this month’s report, but it would be a mistake to completely dismiss the decline in sales. Continued weakness into February could put the Fed into a bit of a predicament, especially if inflation remains stubbornly high. Slower growth with high inflation would make for more interesting Federal Open Market Committee meetings and rate decisions.
 

MUNICIPALS

Florida Governor Ron DeSantis released his 2025-2026 budget and spending proposal. Governor DeSantis indicated that fiscal responsibility will be his theme for the upcoming budget, titling the proposal the “Focus on Fiscal Responsibility” budget. The $115.6 billion plan calls for a reduction in spending compared to the previous year, along with $14.6 billion in reserves. In addition, the governor plans to pay down $1.7 billion of tax-supported debt.

Our Take: Lawmakers will report for the next legislative session in early March and will work to craft the state’s budget, using the governor’s proposal as a guideline. Florida finds itself in a healthy fiscal position. The state has experienced strong sales tax collections, corporate income tax collections, and earnings on investments. Governor DeSantis has prioritized paying down debt in order to decrease fixed costs and allow the state to have additional financial flexibility.  

About Reinhart Fixed Income
“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”). MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

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