Industrial Production is Back


Industrial production jumped 0.7% in March, after being revised up sharply for the month of February. Upward revisions were substantial and attributed to much stronger gains in big-ticket durable goods (including business equipment) and mining. Moreover, gains in March were broad-based in both consumer and business categories Read More »

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Housing Starts Rebound Slowly


Housing starts rose to a 946,000-unit pace in March, after being revised up slightly for the month of February. With revisions, starts are running close to expectations although they should be stronger given the lack of inventories on the market. That said, it was encouraging to see the gain in starts concentrated in the single-family sector, where the boost in employment per square foot of homes built is greatest. Single-family starts were even higher than a year ago, Read More »

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CPI Rebounds from Winter Lull


The Consumer Price Index (CPI) rose  0.2% in March from February, well in-line with expectations and was up 1.5% from a year ago, a little hotter than we saw just a month ago. The portions of the country that escaped the polar vortex suffered a drought, which is pushing up feed prices. In response, prices for everything from meats, poultry, fish and eggs are rising more rapidly for the second month in a row. The only major grocery store index to post a decline was nonalcoholic beverages; it seems in this environment we prefer tap water or beer to sodas. Energy prices declined Read More »

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Consumer Pulse Still Beating


Retail sales rose 1.1% in March, following upward revisions to February, as consumers came out of hibernation and began to spend again. Vehicle sales were particularly robust, as consumers returned to dealer showrooms and tapped the pent-up demand built during the worst months of winter. We also saw strong gains in building materials and garden equipment stores as consumers began to tend to their yards and make repairs in the wake of the unusually harsh weather. People also ventured out to malls, restaurants and bars again, Read More »

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Private Sector Recovers Job Numbers, not Quality


Payroll employment jumped 192,000 in March and was revised up by 37,000 for the previous two months; that puts the total number about where we expected it. Private sector employment crossed its previous peak. The quality of jobs generated, however, is not comparable in any way to those we lost. The overwhelming majority of job gains was concentrated in low-wage industries, while the jobs lost to the Great Recession were much higher-paying jobs in construction, manufacturing and business services. Moreover, the level of job creation now is not enough to accommodate those who have entered the labor force Read More »

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U.S. Trade Deteriorates


The trade deficit widened more than expected in February, as imports rose and exports fell. Imports of vehicles were particularly strong; that could be a problem for domestic vehicle producers going forward even as sales come back, which they did strongly in March. Japanese and Korean producers, in particular, now have unusually large pricing advantages via what some term “currency manipulation” Read More »

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In Defense of Janet Yellen


During a speech in Chicago this week, Federal Reserve Chair Janet Yellen clarified her view of the economy and what she believes is the appropriate monetary policy.  I reread her words and listened to the responses, which ranged from cheers to jeers. The cheers came from Wall Street, as market participants finally received the message she had attempted to send during the press conference following the March meeting of the Federal Open Market Committee (FOMC): The Fed intends to keep monetary policy accommodative for a very long time, Read More »

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Construction Activity Remained Weak in February


Construction spending rose 0.1% in February, after being revised down slightly for the month of January. Losses in single-family construction, most likely due to unusually harsh winter weather, offset gains in multifamily construction. Inventories of new single-family homes remain extremely tight. Commercial construction also showed some pockets of weakness, most notably in office construction for the financial sector. Read More »

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Industrial Production: Big Picture after Small Revisions


The Federal Reserve’s annual revisions for the index of industrial production and related measures of capacity and capacity utilization are available now. These revisions are usually based on a more accurate reassessment of survey data, as well as refinements in methodology and data collection. Changes are usually small but not inconsequential; oftentimes, small revisions have indeed large implications for the broader economic outlook, despite the “rearview mirror” nature of revisions. Read More »

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Affordable Care Act Distorts Income and Spending Data Again


Real (inflation-adjusted) disposable income rose 0.3% in February after being revised down to a 0.2% gain for January. A jump in Medicaid payments associated with the Affordable Care Act (ACA) continued to provide a lift for transfer payments during the month, while gains in wages and salaries were more moderate.

Real consumer expenditures rose 0.2%, Read More »

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