What I Saw Last Week

Case Shiller Index data for January showed the 20-City index up by 6.4%, just above my forecast for an increase of 6.3% year-over-year.


The cities which reported the highest annual increases include Seattle, Las Vegas and San Francisco with increases of 12.9%, 11.1% and 10.2%, respectively. Twelve of the top 20 cities reported a higher price increase in the year ending January 2018 than the year ending December 2017.

The takeaway here is that there are two factors supporting price increases – the low inventory of homes for sale and the low vacancy rate among owner-occupied housing.  The current months-supply (how many months at the current sales rate would be needed to absorb homes currently for sale) stands at 3.4 while the average since 2000 is 6-months, and the high in July 2010 was 11.9.

Consumer Confidence decreased to 127.7 in March – I had forecast a smaller pull back to 129.5 – from a downwardly revised 130.0 (from 130.8) in February.


The takeaway from the report is that, outside of a slight moderation in business expectations, consumers have not reported major changes to their outlook.

The third and final estimate for U.S. GDP in Q4-2017 was revised up to 2.9% from the previously reported 2.5% – I had forecast a smaller increase to 2.6% – as personal consumption expenditures and private inventory investment were both revised higher.


The takeaway from the report is that it does not change the general picture of economic growth at the end of 2017.

The NAR Pending Home Sales Index for February rose by 3.1% to 107.5 – I had forecast an increase to 107.2.


The takeaway here is that although home resales surged in February, after two straight months of declines, a chronic shortage of homes remains an obstacle to a more robust housing market. Notably, when compared to the same month a year ago, pending sales are down 4.1%.

Income & Spending exactly met my forecast with incomes up by 0.4% and spending 0.2% higher in February.


The report showed a modest uptick in the PCE Price Index, which increased 1.8% year-over-year after being up 1.7% year-over-year in January. The core PCE Price Index was up 1.6% year-over-year after three consecutive months of 1.5% year-over-year growth. Real PCE increased less than 0.1%, which should have a negligible impact on Q1 GDP calculations.

The takeaway from the report is that it won’t influence Fed officials to significantly alter the course of monetary policy.

The final Consumer Sentiment number for March declined to 101.4  – I had forecast no change from the earlier reported figure of 102.0.


Uncertainty surrounding the impact of proposed trade tariffs contributed to the modest softening in the Sentiment Index.  The Current Economic Conditions Index pulled back from the preliminary March reading of 122.8 to 121.2, but the final reading still represents a new record.  The Index of Consumer Expectations edged up from 88.6 to 88.8.

The key takeaway from the report is that even after the pullback in the final reading for March, the Sentiment Index remains at its highest level since April 2004.

What to Watch for This Week

Data on U. S. Construction Spending in February should show very modest increase of 0.1% following the zero-growth rate seen the previous month.

Non-Farm Payrolls in March should indicate that the country added 175,000 jobs and the Unemployment Rate  is likely to have dropped to 4.0%.

Consumer Credit rose by $13.9B in January and I expect to see the February number come in at around $15.0B.