What I Saw Last Week

Inflation, as measured by the Consumer Price Index, dropped by 0.1% in March – I had forecast an increase of 0.1% – while core inflation matched my call for an increase of 0.2%.

CPI

On a 12-month basis, total CPI is up 2.4%, versus 2.2% in February and the 1.6% average annual rate over the past 10 years. Core CPI is up 2.1% over the last 12 months, versus 1.8% in February. Notably, that is the highest year-over-year change in core CPI since February 2017 and exceeded the 1.8% annual average over the past 10 years.

The takeaway from the report is that it showed a firming (though not scary) inflation trend that will keep the Federal Reserve wedded to its tightening bias and belief that at least two more rate hikes are warranted this year.

Consumer Sentiment in early April checked in at 97.8 (from 101.4), below my forecast for a smaller drop to 100.4.

The Current Economic Conditions Index dropped from 121.2 to 115.0 and the Index of Consumer Expectations slipped from 88.8 to 86.8.

Sentiment

According to the report, the data is consistent with a growth rate of 2.7% in consumption from mid-2018 to mid-2019. The takeaway from the report is that the monthly drop was due to worries about trade policies and expectations for rising interest rates.

What to Watch for This Week

Total U.S. Retail Sales dropped by 0.1% in February while core sales rose by 0.2%.  I am looking for a turnaround in the total sales number when the March figures are released on Monday.  Look for total sales to have risen by 0.4% and core sales again up by 0.2%.

The NAHB Housing Market Index was measured at 70 in March and the April number should remain at the same level.

U.S. Building Permits ran at an annual rate of 1.298 million units in February and the March number is likely to be somewhat higher. My forecast is for an increase to an annual rate of 1.315 million units.

U.S. Housing Starts were measured at an annual rate of 1.280 million units in February and the March number should be around 1.268 million units.

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