In this week’s economic review, mortgage rates held after rising for the past several weeks, consumer prices saw a minimal gain, retail sales fell, and housing starts and permits dropped despite strong builder confidence.
Consumer Price Index
The Consumer Price Index and core CPI managed 0.2 percent increases in February, nudging the year-over-year CPI to +2 percent. Though the small gain was expected, the year-over-year core CPI is 1 tenth under consensus levels at +1.8 percent.
By sector, the largest jumps in pricing were auto insurance (up 1.7% in the month) and clothing (up 1.5% in the month).
February Retail Sales missed the mark for the third straight month of declines, down 0.1 percent versus expectations of a 0.4 percent gain. Declines were evident across the majority of retail sectors from department stores and health and personal care stores to vehicle dealers and gas stations.
Non-store retailers jumped 1 percent, while building materials increased 1.9 percent. Restaurant sales saw a small thread of improvement with a 0.2 percent monthly gain.
Housing Market Index
While the March Housing Market Index fell 1 point in the month, home builders remain extremely optimistic overall with a score of 70. The present sales component held at 77, but future sales dropped 2 points and traffic fell by 3.
February housing starts mirrored the downfall in home sales. Housing starts fell much lower than expected, down 7.0 percent, and building permits dropped 5.7 percent.
Single-family home permits fell 0.6 percent with year-over-year growth dropping to 4.6 percent. The silver lining is that starts rose 2.9 percent to a 902,000 rate, up 2.9 percent from a year ago, and single-family completions are up 3 percent, offering immediate supply to the housing market.
Sentiment has been lagging over the last year, but March’s preliminary report shows the index is gaining momentum. The index jumped 2.3 points to a level of 102, a 14-year high.
Strength was centered in current conditions, an indicator of consumer spending and employment. The component was up nearly 8 points to 122.8. Inflation expectations were up 0.2 points to 2.9 percent for the year-ahead outlook. Despite the overall index gain, the expectations component was down 1.4 points.
Job Openings and Labor Turnover
January job openings surged to a record 6.3 million versus high-end consensus levels of 5.89 million. December’s job openings were downwardly revised from 5.811 million to 5.667 million.
The gap between openings and hires remains wide with openings 729,000 above hires. The quit rate remained unchanged at 2.5 percent but remains at a post-recession high.
This week in the economy:
- As of March 15th, the 30-year average fixed rate was 4.44% with 0.5 points, according to Freddie Mac.
- In the week of March 9th, the purchase sector of mortgage applications rose a seasonally adjusted 3 percent amidst rising mortgage rates. The refinance sector fell 2 percent in the week, dropping the refinance share of mortgage activity to 40.1 percent. This is the lowest share since September 2008.
- In the week of March 10th, initial jobless claims fell 4,000 after a large 21,000 jump the week prior. At 221,500, the 4-week average is down for the seventh time in the last nine weeks and nearly 7,000 lower than the month-ago comparison.
- The Bloomberg Consumer Comfort Index eased back 0.6 points to a respectable level of 56.2.
The economic calendar for the week of March 19th, 2018:
- Wednesday – MBA Mortgage Applications, FOMC Meeting Announcement, Existing Home Sales
- Thursday – Jobless Claims, Bloomberg Consumer Comfort Index
- Friday – New Home Sales
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