Comerica Economic Weekly

Most U.S. economic data this week shows the adverse impact of much-worse-than-normal winter weather. However, there is a current of momentum beneath the ice. The Conference Board’s Leading Index increased by 0.3 percent in January. Both the coincident and the lagging indexes were positive in January.

January housing starts were weaker than expected, falling by 16.0 percent to an 880,000 unit annual rate. Single-family starts fell to 573,000, the weakest since August 2012. Residential construction permits were down by 5.4 percent in January, to a 937,000 unit rate.

Existing home sales for January fell by 5.1 percent to a 4.62 million unit rate, the weakest since July 2012.  Existing home sales have been hurt by the weather, but the downtrend began last August as mortgage rates increased and institutional buyers cooled their purchases.  Mortgage apps for the first half of February were soft.

The headline CPI increased by 0.1 percent in January despite a larger push from energy. In January, electricity and natural gas prices pushed the consumer energy price index up. The core CPI (all items less food and energy) also gained 0.1 percent in January. The PPI for final demand increased by 0.2 percent in January.

The Philadelphia Fed’s Business Outlook Survey showed that manufacturing conditions in the Mid-Atlantic region cooled in February. Six-month expectations remain positive. The New York Fed’s Empire State Manufacturing Survey dipped in February, but it was still in positive territory.

Initial claims for unemployment insurance fell by 3,000 for the week ending February 15, to hit 336,000. Continuing claims increased by 37,000 for the week ending February 8. We are looking for a decline in continuing claims as extended UI benefits are rolled back.

The Federal Reserve minutes from the January 28/29 FOMC meeting showed that “a few” members raised the possibility that it might be appropriate to increase the federal funds rate relatively soon. Business news media has overplayed that story. We continue to expect that the Fed will keep the fed funds rate near zero for the remainder of this year, while it tapers its asset purchase program down to zero. Further, we expect the Fed to announce another $10 billion reduction in its asset purchase program at the upcoming March 18/19 meeting.

No Spring skips its turn.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly022114.

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