What I Saw Last Week

Total US Retail Sales rose by 0.2% in January – matching my forecast – with core sales coming in at 0.1% and above my forecast for no change.

Retail Sales

Particularly interesting was the fact that the January gains came in on top of an upwardly revised 0.2% increase (from -0.1%) for total sales in December and a 0.1% increase for sales, excluding autos, which were previously reported to be down 0.1%.

While this report doesn’t capture any spending on services, which account for two-thirds of consumer spending, it does offer some encouraging data on goods spending.  Altogether the January Retail Sales report is one the Fed will like to see!

As I had expected, Consumer Sentiment dropped in the early February reading with the Index contracting from 92.0 to 91.7.

Consumer Sentiment

The downturn in February was driven by a dip in both the Index for Current Economic Conditions (to 105.8 from 106.4) and the Index of Consumer Expectations (to 81.0 from 82.7).

It was noted in the release that slowing economic growth was anticipated to slightly lessen the pace of job and wage gains. Consumers, however, saw their personal financial situations as favorable due to the expectation that the inflation rate would remain low for a considerable period of time.

Strikingly, it was noted that consumers anticipated the lowest long-term inflation rate (2.4%) since the question was first asked in the late 1970’s.

What to Watch for Next Week

The NAHB Housing Market Index held at 60 in January and I anticipate that we will see this figure remain static.

Housing Starts dropped by 2.5% in December and I am looking for a turnaround with starts up by 1.9%.


Building Permits also contracted in December (-3.9%) but all of the contraction was from a drop in multifamily permits. Look for further retrenchment here with total permits down by 2.6%.


Inflation – as measured by the Consumer Price Index – declined 0.1% in December with the indexes for both energy and food declining for the second month in a row. Look for a similar top line number for January but core inflation rising by 0.1%.