Vital Statistics:
Stocks are flattish as the Fed meeting begins. Bonds and MBS are down small.
Retail Sales disappointed again, rising 0.2% in February versus expectations of a 0.7% rise. January’s sales were revised downward from -0.9% to -1.2%. Autos were a drag on sales again. Ex-vehicles, retail sales rose 0.3%, which was again below expectations.
While people are making a big deal about the increase in inflationary expectations in the UM Consumer Sentiment Survey, if higher expectations don’t translate into consumers front-loading spending decisions and negotiating higher salaries, then it really doesn’t matter. If anything, the labor market and consumer spending are pointing to a weaker economy, which is generally disinflationary.
Homebuilder confidence fell in February, according to the NAHB Housing Market Index. “Builders continue to face elevated building material costs that are exacerbated by tariff issues, as well as other supply-side challenges that include labor and lot shortages,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. “At the same time, builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration’s pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision.”
“Construction firms are facing added cost pressures from tariffs,” said NAHB Chief Economist Robert Dietz. “Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home. Uncertainty on policy is also having a negative impact on home buyers and development decisions.”
Notwithstanding the fall in builder sentiment, housing starts impressed this morning, rising to an annual pace of 1.5 million units, which was well above expectations. Building Permits rose to a seasonally-adjusted annual pace of 1.46 million units.
The lousy retail sales number kept the Atlanta Fed’s GDP Now Model seeing negative growth in Q1. The model currently sees Q1 GDP falling by 2.1%.
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