With the NYSE closed tomorrow for Good Friday, I’m delivering my regular economic news feature one day early so that you have this information before logging off for the weekend. So it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here in this blog. Let’s take a look at this week’s big headlines.
The American Consumer Comes Out of Hibernation
In March, U.S. retail sales advanced 1.1%, the biggest gain since September 2012 and above economist’ expectations of a 1.0% rise. Receipts rose in nearly all categories. In addition, February retail sales were revised higher to a 0.7% gain from a previously-reported 0.3%. This is the largest gain for retail sales in one and a half years, and it’s a clear sign that the Spring Thaw that I’ve been discussing is finally here. So this was a strong piece of economic news to start off the week with.
Businesses Stockpile A Little More
In March, businesses added 0.4% to their inventories, below economists’ estimates of a 0.6% gain. Retail inventories rose 0.2%, while auto inventories fell for a second straight month. In addition, business sales increased 0.8%, reversing January’s 1.1% decline. At the current sales pace, it would take 1.31 months for businesses to clear shelves. That’s unchanged from January and is the highest ratio since September 2009. This was a so-so report that suggests the pace of restocking could weigh on economic growth in the first quarter. And it shouldn’t be a surprise–I’ve discussed that the inventory surge we saw in the latter half of last year typically means that GDP growth stalls a bit in the following quarter.
Consumer Prices On the Rise
In March, the CPI gained 0.2%, a modest acceleration from the 0.1% rise expected from economists. Excluding food and energy, the core CPI also climbed 0.2%, ahead of the 0.1% consensus expectation. The index was boosted by a 0.4% advance in food prices from the previous month despite a 0.1% decline in energy prices. In the past 12 months, consumer prices increased 1.5% after rising 1.1% over the 12 months through February. Core CPI advanced 1.7% in the same timeframe. So overall inflation remains relatively tame and is firmly below the Fed’s official 2% target.
Home Builders Prepare for Spring
In March, U.S. housing starts gained 2.8% to a seasonally adjusted annual rate of 946,000. Economists were looking for a rate of 955,000, so this was a modest miss of expectations. Building permits, a measure of future activity, fell 2.4% overall, largely due to a 6.4% drop in multi-family homes. This was a so-so report. The good news is that we broke the three month string of housing start declines, and we also saw a 6% gain in single-family home starts, an important barometer of the market and indicator of demand from middle-class families.
U.S. Industrial Production Heats Up
In March, U.S. industrial output increased 0.7%, a bit higher than economist expectations of a 0.5% gain. Manufacturing output, which accounts for three-quarters of industrial production, grew 0.5%, while mining output rose 1.5% and utilities output gained 1%. Meanwhile, industrial capacity utilization increased to 79.2% from an upwardly revised 78.8% in February. This was a good report, following February’s strength, and is a continued sign that the economy is gaining momentum after the unusually cold winter that caused some sluggishness in most of the economic signals.
Jobless Claims Tick Up From Multi-Year Low
Last week, initial claims for unemployment rose 2,000 to an annual rate of 304,000. Economists had predicted a 312,000 annual rate, so this was a modest beat to expectations. Meanwhile, the four-week moving average was 312,000. This was a solid report. The four-week average is now at the lowest since October 2007, and we’re also seeing a significant decline in layoff activity.