In the upcoming March update scheduled for April 20, the Chicago Fed National Activity Index (CFNAI) is projected to see a slight increase to -0.07, based on The Capital Spectator’s median forecast from various econometric models. This figure is a minor improvement over February’s reading of -0.08, indicating that economic growth in the U.S. remains moderately below historical norms. According to guidelines from the Chicago Fed, values below -0.70 signify an “increasing likelihood” that a recession has begun. With this March estimate, the CFNAI’s three-month average is expected to indicate growth that still lags behind historical standards.
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The growth of the U.S. economy slowed down in the first quarter of this year, potentially leading to a flat reading in the Commerce Department’s upcoming “advance” estimate of Q1 GDP, set to be released on April 29. However, from a business cycle standpoint, this recent deceleration has been relatively modest. There is still considerable forward momentum in macroeconomic trends, indicating that although growth has moderated, it follows a period of robust performance.
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● March housing starts in the U.S. increased but fell short of expectations | USA Today
● U.S. jobless claims reached their highest level in six weeks | MarketWatch
● Consumer comfort in the U.S. has declined from its highest level since 2007 | Bloomberg
● Philly Fed Index experienced a larger-than-expected rise in April | RTT
● UK employment surged, bringing joblessness to its lowest since July 2008 | Reuters
● Prices in the eurozone began to rise, alleviating fears of deflation | Reuters
According to a report from the U.S. Census Bureau, residential construction saw a modest rebound last month, though it fell short of predictions. The consensus among analysts at Econoday.com anticipated a significant increase to 1.04 million units in seasonally adjusted annualized terms for March. The actual number reported was 926,000, while February’s revised total stood at 908,000 starts. This modest rise has contributed to a year-to-date trend in construction that remains flat to negative.
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As the Federal Reserve prepares for an interest rate hike, it has been tightening the annual growth rate of the real (inflation-adjusted) supply of high-powered money (also known as base money (M0)). However, economic growth has recently shown signs of instability, highlighted by a disappointing industrial production report for March. This overall slowdown is expected to lead to a near standstill in U.S. GDP growth for the first quarter of this year, as per the Atlanta Fed’s latest projection. In this context, it’s not surprising that the year-over-year change for the real monetary base increased in March after a prolonged period of sharp deceleration.
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● Mining and utilities heavily impacted U.S. industrial production in March | Reuters
● New York’s manufacturing activity unexpectedly contracted in April | RTT
● A survey revealed rising builder confidence in April | MReport
● U.S. mortgage applications declined after consecutive increases | ON
● Inflation is projected to be at 1.7% over the coming year, according to an Atlanta Fed survey | Atlanta Fed
● The Fed’s beige book indicates that the U.S. economy is still growing, albeit slowly | USA Today
Upcoming updates for March are expected to show housing starts increasing at an annual rate of 971,000 units (seasonally adjusted), based on The Capital Spectator’s median forecast from various econometric estimates. This projection indicates a significant uptick in residential construction compared to February’s results.
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U.S. industrial output experienced a notable drop of 0.6% in March, surpassing expectations. This decline marks the third monthly decrease in four months and represents the largest drop since mid-2012, as reported by the Federal Reserve here. More concerning is the persistent slowdown in the year-over-year growth rate for industrial production.
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Healthcare stocks continue to lead among major equity sectors, based on performance over the trailing 252 trading days (one year) through April 14, as measured by a range of ETF proxies. Meanwhile, energy stocks have shown upward movement in recent weeks, raising the question of whether this rally represents a sustainable shift. Previous rebounds in the energy sector over the past year have been short-lived, casting doubt on the current trend.
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● U.S. retail sales increased for the first time in five months, but lingering signs of softness persist | WSJ
● The NFIB small business optimism index saw a decline across the board in March | DMN
● China’s GDP growth slowed to 7%, marking the weakest rate since 2009 | NY Times
● Germany’s consumer prices increased for the second consecutive month in March | RTT
● French consumer prices fell for the third month running | RTT
● India’s wholesale prices decreased for the fifth month in a row | RTT
In summary, the U.S. economy is navigating through a period of mixed signals. While some indicators, such as retail sales and healthcare stocks, show improvement, others reveal worrying trends, particularly in industrial production and job claims. As we look ahead, the continuing trend of economic growth will depend on how these various elements balance out in the coming quarters.
