What I Saw Last Week
Total U.S. Retail Sales rose 0.6% in March (I had forecast +0.4%) following a 0.1% decline in February. Excluding autos, retail sales jumped 0.2%, as I had forecast, matching the 0.2% increase seen in February.
Motor vehicle sales (+2.0%) led the overall advance, along with heath and personal care stores (+1.4%) and non-store retailers (+0.8%). However; there were some weak spots with sporting goods (-1.8%), clothing and clothing accessories (-0.8%), building materials (-0.6%), and gasoline station sales (-0.3%) suffering the greatest declines.
The growth in core retail sales (which exclude auto, building materials, gasoline station, and food service and drinking places sales) factor in to the goods component of the GDP report, so it will be a positive input for economists making first quarter GDP forecasts which are released later this week.
The takeaway from the report is that March stopped a streak of three consecutive monthly declines in retail sales, although it also demonstrates that consumers continue to show some restraint in discretionary spending.
According to the NAHB Housing Market Index, builder confidence in the market for newly-built single-family homes took a one-point dip to 69 in April. I had forecast it to have remained at 70.
Among the HMI components, the index measuring buyer traffic held steady at 51 the index charting sales expectations in the next six months fell a single point to 77. and the component gauging current sales conditions dropped two points to 75. Looking at the regional HMI scores, the South remained unchanged at 73, the Northeast fell one point to 55, the Midwest declined two points to 66 and the West dropped three points to 76.
The takeaway from this report is that strong demand for housing is keeping builders optimistic about future market conditions; however, builders are facing supply-side constraints, such as a lack of buildable lots and increasing construction material costs. Tariffs placed on Canadian lumber and other imported products are pushing up prices and hurting housing affordability.
U.S. Building Permits rose 2.5% to a seasonally adjusted annual rate of 1.354M units – I had forecast an increase to an annual rate of 1.315M.
Notably, single-family permits were down 5.5% compared with February.
By region, single-family permits were down 19.0% in the Northeast, down 4.7% in the Midwest, down 4.9% in the South, and down 3.6% in the West.
U.S. Housing Starts increased 1.9% month-over-month to a seasonally adjusted annual rate of 1.319 million units (I had forecast 1.268M).
By region, single-family starts were down 9.4% in the Northeast, up 37.7% in the Midwest, down 9.8% in the South, and down 8.1% in the West.
The takeaway from the report is that the monthly increases were driven entirely by multi-unit dwellings. Single-family starts were down 3.7% which is disappointing given the supply shortage of single-family homes.
What to Watch for This Week
U.S. Existing Home Sales were running at an annual rate of 5.54M units in February and I am looking for the March data to show some very modest improvement with sales rising to an annual rate of 5.57M units.
The Case Shiller Index for US home prices showed the 20-City index up by 6.4% year-over-year in January and the February number is likely to remain at its current level.
U.S. New Home Sales in February were measured at an annual rate of 618,000 units. The March figure is likely to some improvement to a seasonally adjusted annual rate of 631,000 units.
Consumer Confidence dropped to 127.7 in March and the April figure will likely also be lower. Any number above 126.1 will be a positive.
The advanced estimate for US GDP in Q-1 should show the national economy grew by 2.1% – down from the 2.9% seen in Q-4 of 2017.
The final Consumer Sentiment number for April should have increased from the initially reported 97.8. I am expecting to see 98.0.