Wednesday, April 16, 2014

Beige Book: U.S. Economy Grew at “Modest to Moderate Pace”

The Federal Reserve’s Beige Book, released today indicated that economic expansion is continuing at a “modest to moderate pace.” The report noted that most regions have improved since the last report. Reports from Boston, Philadelphia, Richmond, Atlanta, Minneapolis, Kansas City, Dallas and San Francisco all indicated modest to moderate growth. Chicago saw an increase in activity, while the Cleveland and St. Louis districts saw a decline.

The cold weather impacted the last report, and this report saw a general increase in consumer spending. Moreover, manufacturing improved, with several districts noting, “that the impact of winter weather was less severe than earlier this year.”

The report noted that hiring was “mixed by general positive.” This stands in contrast to March’s jobs report, which indicated a “softening” in hiring activity. Many districts are reporting difficulty filling qualified workers for high-skilled positions.

Loan demand “strengthened” since the last report. New York and Dallas reported the strongest gains. The weather improvement allowed home sales to pick up, along with mortgage borrowing. Only Kansas City saw a decline in the number of loans.

Read the Federal Reserve release.

Industrial Production Improved 0.7% in March

Industrial production rose 0.7% in March, following a strong surge in February. February’s revision from 0.7% to 1.2% is the largest monthly increase in over a year. All three major components – manufacturing, mining and utilities – contributed to March’s growth.

Manufacturing growth improved 0.5% in March. However, motor vehicles and parts declined 0.8% after sharply rising 6.9% the month prior. The remaining categories improved.

Mining production grew 1.5% in March, the strongest growth since last summer. Utilities production increased 1.0%, after declining the month prior. The capacity utilization ratio gained ground in March as it rose to 79.2 from a revised 78.8.

Read the Federal Reserve release.

Housing Starts Rose in March

New residential construction rose in March to an annualized pace of 946,000 units. March’s rate improved 2.8% from the month prior, but was still below the pace at the end of last year. March’s gains were softer than anticipated. After a cold and harsh winter, there was an expected catch-up effect.

Single-family starts drove March’s improvement from the month prior growing to an annualized pace of 635,000 units, up 6.0% increase from the month prior and the highest level all year. However, single-family starts are still below end of 2013 levels. Multi-family starts dipped 3.1% to a pace of 311,000.

Permit issuance was mixed as well. Single family grew 0.5%, ending a 3 month decline. Multi-family dropped 6.4%, but the month prior saw double digit gains.

Despite the improvement, housing starts remain well below the long run average of 1.5 million units.

Read the Census report.

Tuesday, April 15, 2014

Consumer Prices Rose 0.2% in March

The consumer price index growth accelerated in March, growing 2%, which is up from the 1% growth the month prior. Price gain was driven by food and services price increases. Consumer prices have increased for the past 5 consecutive months. Prices are now 1.5% above year ago levels. March's year-over-year growth is higher than February's growth, but below January's

Energy services prices jumped 2.6% in March. However, the overall energy index declined 0.1%, the second consecutive month to do so. The decline was led by a 2.9% drop in fuel prices and a 1.7% drop in gasoline.

Food improved 0.4% for the second consecutive month. The rising cost of food suggests that declining gasoline and fuel costs have yet to impact food prices.

Read the BLS report.

Monday, April 14, 2014

Retail Sales Jumped 1.1% in March

Retail sales jumped 1.1% in March, and the report included a strong upward revision to the month prior. March gains were the strongest in over a year. Auto dealers led the increase. Year-over-year growth also saw strong growth, improving 3.8%.

The unusually cold weather in January and February created pent-up demand that boosted sales in March. Auto sales surged 3.1% from the previous month. General merchandisers also showed strong improvement with growth at 1.9%. Sales excluding auto and gas improved 1.0%.

Not all components grew. Electronics and appliances declined 1.6% and gasoline stations saw sales decline 1.6%.

The strong growth in March correlates with strong employment gains, and those gains should continue into the second quarter as retail sales further grow.

Read the Census report.

Friday, April 11, 2014

Producer Prices Rose 0.5% in March

Produce prices appreciated 0.5% in March, reversing a decline from the month prior. March’s gain was driven heavily by wholesale and retail growth. Producer price appreciation from one year ago rose slightly to 1.4%, higher than February’s 0.9%, but below the 2.0% target of the Federal Reserve.

Prices for finished energy goods declined 1.2% in March, their first decline in 4 months. The finished consumer foods index appreciated by a strong 1.1%.

Prices at earlier stages of production were mixed as well. Processed intermediate food grew 1.6% while unprocessed intermediate food jumped by 7.6%. Total intermediate goods declined by 0.2%, the first decline since November. However, the index is still up 0.7% from year ago levels.

Read the BLS report.

Thursday, April 10, 2014

Initial Claims at Lowest Level Since 2007

Initial claims for unemployment have fallen to their lowest level since 2007, with just 300,000 claims last week. Typically initial claims are measured on a 4 week moving average due to their volatility, but the 300,000 mark is significant.

The downward trend implies steady job growth and improved hiring rates. Additionally, lower firings mean better job security which is a positive for consumer sentiment and spending.

Read the Department of Labor report.