Analysts at Nomura note that the US Treasury reported that the federal budget deficit expanded to $215bn in Feb from $192bn in Feb 2017.

Key Quotes

“The deficit came in line with the Congressional Budget Office’s (CBO) monthly budget review for Feb. Total receipts fell 9.4% y-o-y while total spending increased 2.0% y-o-y. The recent employer changes to withholding tables in Feb likely reduced receipts, while increases in wages and salaries were not enough to offset a drop in withholding. As March will mark the first full month of mandatory updated withholding tables, it could show an even steeper drop in revenue, widening the FY18 budget deficit further. Monthly spending was boosted by increases in defense outlays. Spending by the Federal Emergency Management Agency remained elevated in the aftermath of last year’s hurricanes and other natural disasters.”

“GDP tracking update: Net defense spending was slightly lower than we expected, pointing to a modestly lower contribution to GDP growth from government spending. But, after rounding, our Q1 GDP tacking estimate remains unchanged at 1.7% q-o-q saar.”