he pattern of adverse cold weather and snowfall in a large swath of the United States looks very similar to last year. The weather is again at play and could well account for downward revisions to estimates for economic growth.
However, this year’s economic factors are substantially different and provide a stronger foundation for consumer spending in the months ahead. Job growth and openings have risen, energy prices have declined along with inflation, and wages and salaries are stronger. First quarter activity is soft, but the economy remains on firm tracks and is expected to pick up in the coming months.
This month’s full report includes these highlights:
The outlook remains positive as households are benefiting from low gas prices, job gains and rising home prices.
Households cited weaker finances compared with last year. Nevertheless looking forward, the tightening of the job market should bring about stronger wage growth in the months ahead.
Core inflation is expected to be driven by the push and pull of import prices related to the stronger U.S. dollar along with wage and salary gains as slack in the labor market is reduced.
Gross Domestic Product
It is not clear what has caused the economy to slow but a number of factors could be at play. The composition of GDP, however, with the current revisions indicates a more positive outlook.
February home sales are the strongest since February 2008 and are well above expectations. The pace of January and February new home sales is in sharp contrast to the tepid sales registered in 2013 and 2014.
February’s payroll growth remained on solid footing with a gain of 288,000 jobs. Overall employment — public and private sectors combined — increased 295,000 in February.
Retail Jobs and Openings
The churn or turnover in the job market is another good sign of a strengthening job market as workers are becoming confident about job prospects.
Personal Income and Spending
The wage and salary component of income rose 0.6 percent after rising 0.1 percent in December. Wage growth is stronger, registering at nearly a 4.6 percent year-over-year rate for the same month a year earlier.
Chicago Fed National Activity Index
Further reduction in unemployment is needed to push inflation toward the Federal Reserve’s targeted levels.