MONTHLY ECONOMIC REVIEW: CONSUMERS ARE IN THE DRIVER’S SEAT

When it comes to the U.S. economy, one can’t help but feel a sense of déjà vu. Similar to last year, unseasonably cold weather and lingering caution among budget-conscious consumers have dampened economic activity since the first of the year. However, as we head into the second quarter, I expect we’ll see that the consumer is actually more in the driver’s seat compared to this time last year. Lower energy costs, rising home equity, job and income gains and increased buying power from the stronger U.S. dollar will all continue to positively contribute to greater consumer spending ability — a key factor for further economic gains.

Other positive factors that will continue to influence improved growth in consumer spending include growth in real disposable income, which has grown 4 percent on a year-over-year basis ending in February — the fastest rate seen in two years — and stock market gains that are about 12 percent above this time last year. Additionally, housing price appreciation and decreased household debt burdens are at their lowest in at least 35 years, contributing to bigger gains in consumer confidence.

Economic expansion in the United States is expected to continue, but the burden of carrying the world economy on its shoulders could be an obstacle on the path toward stronger U.S. gains.

This month’s full report includes these highlights:

Retail Sales

Retail sales (excluding automobiles, gasoline stations and restaurants) reversed course and increased 0.5 percent in March after dropping 0.4 percent in February.

Consumer Sentiment

The University of Michigan consumer sentiment index beat expectations in the first half of April, increasing to 95.9 from March’s average of 93.

Consumer Prices

The March headline Consumer Price Index rose 0.2 percent between March and February. This was the second positive reading in five months.

Gross Domestic Product

The third estimate of fourth-quarter GDP reflected no change to the 2.2 percent rate from the second estimate.

Housing

Single family starts rebounded by 4.4 percent to 618,000 units in March and homebuilding is off to a good start. Weather appeared to play a negative role earlier this year not only on starts but on completions.

Employment

Job growth slowed in March as private payrolls rose an anemic 129,000. Overall employment (public and private sectors combined) increased 126,000 in March.

Retail Jobs and Openings

Total retail employment across all industry segments increased 25,900 to 15.6 million in March. There were 463,000 job openings in the retail industry on the last business day of February.

Personal Income and Spending

Personal income rose by 0.4 percent in February while personal consumption inched up only 0.1 percent.

Chicago Fed National Activity Index

The economy was growing even slower last month according to the Chicago Fed National Activity Index which recorded activity dropped to -0.42 in March from -0.18 in February.

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MONTHLY ECONOMIC REVIEW: LINGERING WINTER CHILLS ECONOMY, STRONGER SPRING EXPECTED

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:

Retail Sales

The outlook remains positive as households are benefiting from low gas prices, job gains and rising home prices.

Consumer Sentiment

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.

Consumer Prices

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.

Housing

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.

Employment

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.