What I Saw Last Week

U.S. Retail Sales exactly matched my forecast for an increase of 0.3% in April, on top of an upwardly revised 0.8% increase (from 0.6%) in March.  Excluding autos, retail sales rose 0.3% (lower than my forecast for +0.5%) on top of an upwardly revised 0.4% increase (from 0.2%) the prior month.

Retail sales

While there was a headline miss for the ex-auto number, that disappointment should be mitigated by the upward revision for March.  On a year-over-year basis, retail sales increased 4.7% with the core rate up 4.8%.

The takeaway from the report is that consumer spending on goods was decent in April. Core retail sales, which exclude auto, gas station, building materials, and food and drinking services sales, jumped 0.4%.

The NAHB Housing Market Index jumped two points in May – I had forecast no change – while the April number was revised down from 69 to 68. The May reading of 70 represents the fourth time this year that the index has been at or above that point.  It is notable that the May number reversed a three-month decline.


Regional measured are presented as three-month moving averages.  Scores in the West and Northeast held steady at 76 and 55, respectively. Meanwhile, the South and Midwest each edged down one point to levels of 72 and 65.

The May report showed that builders are buoyed by growing consumer demand for single-family homes; however, the record-high cost of lumber continues hurting builders’ bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market.

U.S. Building Permits fell 1.8% in April to a seasonally adjusted annual rate of 1.352M. I had forecast a more modest drop of 0.3%.


Although the headline number was a disappointment, we can take some solace in the fact that permits for single-family homes rose 0.9%. By region, they declined 3.9% in the Northeast, rose 2.5% in the Midwest, were up 4.8% in the South, but dropped 6.7% in the West.

Multi-family permits declined 6.3% while multi-family starts dropped 11.3%.

U.S. Housing Starts declined 3.7% month-over-month in April to a seasonally adjusted annual rate of 1.287M. I had forecast a 0.5% increase.


Single-family starts increased just 0.1%, with month-over-month declines registered in every region except the South (+17.2%). Single-family starts declined 9.7% in the Northeast, 29.8% in the Midwest, and 10.1% in the West.

The takeaway from the report is that single-family activity remained fairly muted. Bad weather will get some blame for the torpid activity overall, yet nothing in this report suggests prospective homeowners can expect supply-driven price relief in the near future. In fact, if single-family starts continue at the strong yearly growth rate we saw in April, it will be fall 2019 before annual single-family starts break the 1 million mark consistently, which is still 17% lower than normal.

What to Watch for This Week

U.S. New Home Sales ran at an annual rate of 694,000 units in March and I expect to see the April number pull back to 677,000. Land and construction costs are still substantial impediments.

U.S. Existing Home Sales were measured at an annual rate of 5.6 million units in March and the April number will likely pull back to 5.57 million as a consequence of low inventory.

The final Consumer Sentiment number for May should stay at the early month level of 98.8.