What I Saw Last Week

The Survey of Consumers conducted by the University of Michigan showed an uptick in the preliminary April reading for Consumer Sentiment which came in at 98.0 – I had anticipated a drop to 96.3.


The Current Economic Conditions Index rose from 113.2 to 115.2 – up from 106.7 in the same period a year ago – while the Index of Consumer Expectations rose from 86.5 to 86.9. (This index stood at 77.6 in the same period a year ago.)

The takeaway from the report is that consumers are feeling very good about current economic conditions, evidenced by the Current Economic Conditions Index rising to its highest level since 2000 and trending toward its all-time peak of 121.1 set in 1999.

The Retail Sales report for March was disappointing, not only because it was weaker than expected, but also because it featured downward revisions to the February number.

Total retail sales dropped by 0.2% (I had forecast a drop of 0.1%), and core sales remained unchanged.

Retail Sales

The downturn in March was driven by weakness in auto sales (-1.2%) and gasoline station sales (-1.0%), as expected. There was also some notable weakness, though, in building material and garden equipment and supplies dealer sales (-1.5%) and food services and drinking places sales (-0.6%).

Some offsetting strength was provided by electronics and appliance stores (+2.6%), miscellaneous store retailers (+1.8%), clothing and clothing accessories (+1.0%), non-store retailers (+0.6%), food and beverage stores (+0.5%), and general merchandise stores (+0.3%).

On a year-over-year basis, retail sales are up 5.2%. Excluding autos, retail sales are up 5.6%.

The takeaway from the report is that it underscores a clear divide between the strong consumer confidence readings, which are “soft” data, and the sluggish spending on goods by consumers, which is “hard” data.

Inflation, as measured by the Consumer Price Index, dropped by 0.3% in March (I had forecast no change) with core CPI dropping by 0.1%.


The March decline in CPI was the first monthly decline since February 2016 and the decrease in core CPI was the first since January 2010.

On a year-over-year basis, CPI is up 2.4%, versus 2.7% for the 12-months ending February. Core CPI is up 2.0% – the smallest 12-month increase since November 2015.

The takeaway from the report is that consumer inflation pressures eased in March, and it wasn’t just driven by a downturn in energy prices. That should take some of the edge off with respect to the idea that the Federal Reserve might have to be more aggressive than expected this year with its policy tightening efforts.

What to Watch for This Week

The NAHB Housing Market Index was measured at 71 in March and I expect to see a slight pullback in the April number. Look for it to come in down one point to 70.

U.S. Building Permits were running at an annual rate of 1.213M units in February. I expect to see improvement in the March report with the figure rising to an annual rate of 1.240M units.

U.S. Housing Starts are likely to drop back from the annual rate of 1.288M seen in February.  My expectation is for a figure closer to 1.260M units.

U.S. Existing Home Sales dropped in February to an annual rate of 5.48M units.  Look for a better number of sales in March and the annual rate rising to 5.55M units.