It’s Friday and that means 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 every Friday. Let’s take a look at this week’s big headlines…
After a couple soft showings in January and February, March Retail Sales still didn’t pick up as hoped for. Up only 0.6% at the headline level, core readings posted 0.3% gains ex-auto ex-gas and 0.4% for the control group. Year-on-year growth rates for core readings were down 0.2 points to 3.9% ex-auto ex-gas, and they were down 0.3 points in the control group to 3.8%.
That leads us to the big story in this reading for March, which is the 2.0% jump in auto sales. Without that jump, however, as in the previous months’ gains of 0.2% and 0.1%, retail sales only managed a 0.2% gain overall. This doesn’t point to much consumer strength.
Department stores and clothing stores had big declines of 0.3% and 0.8% respectively, while building materials also saw a 0.6% decline and sporting goods saw a massive 1.8% decline. The positive news, however, was a second straight rise in restaurants to a 0.7% gain, and once again, nonstore retailers led the report with a 0.8% gain.
Inventories are on the rise, which is in line with underlying demand and a good sign for GDP. In fact, rising in February by 0.6% for the second straight month, inventories are looking to be a big contributor to first-quarter GDP; although, we’ll have to wait and see if March shows any tariff-related stockpiling of metals.
Wholesalers show the biggest build up at 1.0% for February, while retailers are up 0.4% and manufacturers are up 0.3%. All this bodes well for GDP. The common consensus is the more sizable the build up you see in inventories, the greater the metric’s overall contribution to GDP.
Housing Starts and Building Permits
With March results still to be posted, housing is off to an uneven start this year. On the sales side, however, residential investment looks like it will be a solid contributor to GDP since construction has ended the quarter with a great deal of momentum.
Shifting to specific numbers, housing starts topped Econoday’s estimates at 1.319 million annualized. Permits also topped estimates at 1.354 million.
There was a little weakness in this report with completions slowing 5.1% to 1.217 million. Single-family starts were also down 3.7% to 867,000, while permits were down 5.5% to 840,000. However, the clear standout in Tuesday’s report was multi-family units. Starts rose 14.4% to 452,000 and permits rose a sizable 19.0% to 514,000.
There were plenty of positives in Tuesday’s Industrial Production report, with mining once again leading the report overall. In March, production rose 0.5% to a 4.3% year-over-year rate increase. In fact, mining alone jumped a full 1.0% to bring its own year-over-year rate up to a massive 10.8% gain. In addition to the mining numbers, utilities had a solid March, output went up 3.0% for the month and 5.3% year-over-year.
However, we should keep in mind that with its positive production jump, the clearest stress point for this report is also in mining. Capacity is already at 90.1%.
Of course, not all the numbers were this rosy. Manufacturing only gained 0.1% for the month, and the consensus isn’t expecting to see any sizable increases in this metric anytime soon. However, tariff fears don’t appear to have had any effect yet on aluminum and steel, which is good news. Also, on the positive side of things, business equipment output is up 4.4% for the year, and vehicle production is up 2.7% for March.
Index of Leading Economic Indicators
Even with unemployment claims and the factory work week holding it back, the index of leading economic indicators still showed a respectable 0.3% gain. This is coming off two strong increases in a row of 0.7% and 0.8% respectively. However, Thursday’s report indicated that March’s slowdown definitely needs to be watched.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,