Deja vu all over again? Last spring Federal Reserve Chairman Bernanke used the term “transient factors” to describe the reasons for cooler than expected economic growth. This spring we see that transient factors are again responsible for weak data. Unseasonably warm weather from late 2011 into early 2012, plus difficult seasonal adjustment calculations around the Easter holiday have combined to dampen data from March and April. Also, renewed concerns about cooler growth in Asia and a death-spiral in the Spanish economy, as housing markets there rapidly deflate, may be weighing on business confidence here. What remains to be seen is whether or not the broad current of improvement in the U.S. economy since mid-2011 is sustainable through the temporary downdrafts. At this point it does appear that fundamental momentum will continue into mid-year. The Leading Economic Index for March showed a 0.3 percent increase. The coincident index gained 0.2 percent and the lagging index increased by 0.3 percent. A contemporaneous improvement in all three indexes is a sign of broad-based gains in economic activity. Existing home sales fell beneath expectations for March, decreasing by 2.6 percent to hit a 4.48 million unit annual rate. For the year ending in March, existing home sales have increased by 5.2 percent. With gradual improvement in sales we are also seeing signs of firming prices. According to the National Association of Realtors the median sale price of an existing home in March was up 2.5 percent from a year ago. Initial claims for unemployment insurance ticked down by 2,000 to hit 386,000 for the week ending April 14. The disappointment in this number stems from the fact that claims ticked up significantly, by 26,000, for the week before but did not correct this week. Here is where the seasonal adjustment factors around Easter wreak havoc with the data. The outsized gain in claims for the week ending April 7 will likely be reversed by early May. One of the more weather-dependent industries, residential construction, shows mixed signals for March. The mix comes from an unexpected decline in housing starts, accompanied by gains in construction permits and in completions. Total housing starts declined by 5.8 percent in March to hit a 654,000 unit annual pace. Single-family starts were essentially unchanged for the month. The volatility came from the multifamily side where starts dropped 19.8 percent to 178,000. Permits for new construction increased for the third straight month, up 4.5 percent in March to a 747,000 unit annual rate, the strongest annual rate for permits since September 2008. Completions of residential housing increased by 4.2 percent in March, implying that builders focused on finishing ongoing projects rather than starting new ones last month. Total retail sales for March increased by 0.8 percent, above consensus expectations of about 0.4 percent growth. Gains were broad-based, including a 1.1 percent increase at auto dealers despite the reported decline in unit auto sales to a 14.3 million unit rate in March.
Click here for the complete Comerica Economic Weekly: CMAEconWeekly042012.