S & P Corelogic Case-Shiller HPI

Home prices are up; first it was at three and half year highs last week in FHFA’s data and today and Case-Shiller beats the top end of estimates with a very strong 0.8 percent monthly gain for a 6.4 percent year on year rate that matches November of last year’s 3 ½ year high. Prices across most of the nation are growing at a healthy and sustainable rate.

Consumer Confidence

The consumer confidence index, at 127.7, eased back slightly in March but remains very strong especially the assessment of the labor market where only 14.9 percent of people say jobs are hard to get. This component is closely watched by forecasters and the reading, which is down 2 tenths from the very strong February reading. This high percentage will firm the expectations for yet another favorable monthly employment report. This year’s tax cut has been offsetting trouble in the stock market and continue to support confidence readings. Yet confidence in stocks is eroding with only 35.4 percent of the sample see year ahead gains for the market vs. 40.1 percent in February and a peak of 51.0 percent in January when the sell off first hit. Other readings include a downtick in inflation expectations, now at 4.6 percent after having shown hints of life in the months prior. Buying plans are especially soft for homes which are at only 5.5 percent, down a couple of percentage points over the past couple of months which hints at future slowing in the housing market.

Mortgage Applications

Purchase applications for home mortgages rose a seasonally adjusted three percent the week of March 23rd, increasing by two percentage points on a yearly basis up to 8 percent. Refinancing activity, which has been subdued by the recent rising interest rates, also saw an increase with applications for refinancing increasing by 7 percent from the prior week, raising the refinance share of mortgage activity 0.9 percentage points to a still low 39.4 percent. Purchase applicat5ions continue to show solid year on year gains and point to housing market strength.


Fourth quarter GDP is revised 4 tenths higher in the third estimate to a 2.9 percent annualized rate that beats economists’ consensus by 2 tenths. Consumer spending gets a two tenth upgrade to a 4.0 percent rate as spending on services is revised 2 tenths higher to 2.3 percent with nondurable spending getting a 5 tenths upgrade to 4.8 percent. Spending on durables is revised 1 tenth lower to a still very strong 13.7 percent that reflected hurricane replacement for autos which pulled vehicle sales out of the ongoing quarter. Contribution from consumer spending to the fourth quarter’s total growth rate was 2.8 percentage points, almost the entire GDP rate. Nonresidential fixed investment is upgraded 2 tenths to a very solid 6.8 percent rate and contributing 0.8 points to the quarter that, unlike consumer spending, may be extending that strength into this quarter based on last week’s durable goods report. Residential investment is revised 2 tenths lower to 12.8 percent for a contribution of 0.5 points. Slowing In inventory growth held down growth overall slightly less than in the second estimate, at minus 0.5 points, with the drag from net exports revised factionally higher, now at minus 1.2 percentage points. Government purchases are revised slightly higher to 3.0 percent which contributed 0.5 points to the quarter. The fourth quarter was very solid, when excluding both inventories and exports, GDP rose 4.5 percent which is also 2 tenths higher than the second estimate. For the ongoing first quarter, consumer spending. Or lack thereof, is the question.

International Trade in Goods

The nation’s trade deficit in goods failed to improve in the month of February when it was at a very steep $75.4 billion which is nearly $1.5 billion deeper than economists predictions yet remains little changed from January’s revised $75.3 billion. Imports rose 1.4 percent tin the month with foods rising sharply along with imports of capital goods and industrial supplies as well. Imports of vehicles also rose sizably but not consumer goods which posted only a small gain. Exports are actually strong in this report, up 2.2 percent with gains centered in vehicles, which are usually a weak category, and also capital goods which is the nation’s strength. Exports of consumer goods, a major weakness declined sharply after bouncing higher in January.  Based on the two months of data, net exports won’t be helping first quarter GDP though the negative pull may be offset by a rising inventory build.

Pending Home Sales

Existing home sale have been struggling to move higher but today’s pending home sales index will raise expectations for improvement. Pending home sales rose a sharp 3.1 percent in data for February though they follow an even sharper 5.0 percent revised decline in January.

Jobless Claims

March looks to be yet another strong month for the labor market based on jobless claims which are at record lows. Initial claims fell 12,000 in the week of March 24th to a lower than expected level of 215,000 and the lowest level in 45 years. The four week average is also down slightly to 224,500 and in line with the February trend. In the lagging data for the week of March 17th, continuing claims rose 35,000 but this four week average is down12,000 to 1.862 million and running roughly 50,000 below February. The unemployment rate for uninsure4d workers is only 1.3 percent.

Personal Income and Outlays

Inflation data are inching higher while softness in spending is offset by strength in wages. The core PCE price index managed only a 0.2 percent gain in February, which was what was expected. The year on year rate moved a notch higher to 1.6 percent which his still subdued but just over economists’ predictions. Overall prices rose 0.2 percent with this yearly rate also up 1 tenth at 1.8 percent. Movement is slow but consistent with the Fed’s expectations for a gradual rise this year to their 2 percent inflation target rate. The strongest news in the report comes from the wages and salaries component of personal income which posted its fourth straight gain up sharply at 0.5 percent. This helped total income which rose 0.4 percent for at third straight month and also helped the savings rate which rose 2 tenths to a still modest level of 3.4 percent. Also helping savings, at the cost of retailers, was softness in spending which gained only 0.2 percent for the second straight months. Spending on services, at 0.3 percent, continues to hold this component up. Consumer spending doesn’t look like it will be the backbone of the first quarter GDP report like it was in the fourth quarter of last year.

Consumer Sentiment

Consumer sentiment held strong the last two weeks of the month as the final March index came in at a 14 year high of 101.4 vs. 102.0 the mid-month reading and well above February’s reading of 99.7. The current conditions component closed the month at a record 121.2 for a 6.3 point monthly gain which points to strength in consumer spending for the month of March. The gain here is tied to rising confidence among lower income respondents in contrast to the expectations component which, at a level of 88.8 is at a 1.2 point loss, being held back by the easing confidence among higher income respondents. The report notes that the risk of rising interest rates tied to Fed policy, is a negative factor for the high end group. Inflation expectations much like the core PCE index released earlier are moving up but at a slow pace up 1 tenth higher for the year ahead outlook to 2.8 percent with the five year outlook unchanged at 2.5 percent.