Main Management, LLC’s Post

Housing starts and building permits for March came in well below expectations, with starts falling -14.7% month-over-month to 1.321 million units (saar) and permits dropping -4.3% to 1.458 million units (saar). Both single-family and multi-family starts saw sharp declines, with single-family starts down -12.4% and multi-family starts plunging -21.7%. Single-family permits decreased by -5.7%, while multi-family permits slipped -1.2%.   Under the covers, the multi-family sector has been consistently weak in recent months, despite a large number of units currently under construction. The single-family sector, however, tells a different story. While single-family starts dropped significantly in March, this followed a substantial +14.6% surge in February. Over the past year, single-family starts have been trending higher, up +21.2% year-over-year. Single-family permits, which are generally considered one of the most useful forward-looking indicators from this report, have also increased at a solid rate over the past year as a whole. However, the -5.7% drop in March was a notable setback.   The data comes on the heels of April's NAHB housing market index, released yesterday, which measures homebuilder sentiment. It remained unchanged at 51 in April (a reading above 50 indicates that more builders view conditions as good rather than poor). The report suggested that while there's potential for growth in housing demand, buyers are hesitating until they have a better sense of where interest rates are headed. Looking ahead to Thursday, we'll get March existing home sales data, which will give us a more complete picture of the housing market.    #housing #markets #inflation #economics #realestate #economy #equities

The preliminary April reading for University of Michigan Consumer Sentiment declined to 77.9 from 79.4, below forecasts for a 79 reading. Consumer Expectations declined to 77.0 from 77.4 and Current Economic Conditions moved down to 79.3 from 82.5. This reading is often influenced by inflation, so given the hot CPI print we saw earlier this week, it’s not a big surprise to see sentiment dip.

The March Retail Sales report came in stronger than expected, with headline sales rising 0.72% month-over-month, surpassing the 0.3% forecast, and core retail sales climbing 0.95% m/m, also beating expectations for a 0.3% reading. February's headline number was revised upward from 0.58% to 0.94%, adding to the positive momentum.   E-commerce, or "non-store retailers", led the way with a +2.7% increase on the month and an impressive +11.3% year-over-year growth. However, "Clothing & Clothing Accessories Stores" sales saw a -1.6% m/m decline, despite a hot March inflation number for Clothing in the CPI report last week. The drop in Clothing retail sales (which are a nominal number, i.e. not inflation adjusted), while clothing inflation rose, hints at the fact that the hotter inflation prints recently are likely not demand-driven, as they largely were during 2022. Consumers are making tradeoffs, rather than increasing spending across the board in response to higher prices. That also aligns with why inflation expectations have been kept in check to start the year, even as monthly inflation numbers have come in hotter than expected.    The persistent strength in the labor market has likely been supporting consumer spending this year, which is good news for GDP growth but may not be as promising for those hoping for rate cuts. Following the release of the report, the Atlanta Fed's GDPNow model boosted its Q1 2024 GDP estimate from 2.4% to 2.8%.   #retailsales #inflation #economics #markets #equities #stocks 

Thank you to Asset Management Group Inc. for this great podcast featuring, Moise Piram, Andrew Nida, and our very own Kim Arthur!

Today's March Producer Price Index (PPI) data, released after yesterday's higher-than-expected CPI, showed that inflation at the producer level remains subdued. The headline PPI rose 0.15% month-over-month, below the forecasted 0.3% increase, while core PPI, which excludes food and energy prices, rose 0.23%, in-line with expectations. On a year-over-year basis, headline PPI accelerated to 2.10%, the highest since April 2023, while core PPI accelerated to 2.38%, the fastest pace since August 2023. However, part of the increase in the year-over-year rates can be attributed to tough comparisons, as a negative monthly reading from last year rolled off.   A closer look at the PPI components shows a continued divergence between goods and services. Goods PPI declined -0.12% month-over-month, marking the fifth decline in the last six months, and remains below its long-term year-over-year median of 1.6% at 0.87%. In contrast, services PPI rose 0.28% month-over-month and stands just above its median of 2.0% at 2.79% year-over-year.   Based on the March CPI and PPI data, estimates for core PCE inflation are now ~0.27% month-over-month, corresponding to a 2.7% year-over-year rate (versus 2.8% in February). Market odds for rate cuts moved marginally higher on the release, but still suggest only 1-2 cuts for the full year. As discussed yesterday in the CPI post, the timing of these rate cuts may be complicated by the November election, potentially pushing the first cut all the way to December if the Fed doesn't feel comfortable with a July cut – as the meeting after would be in September, quite close to the election.   #economics #ppi #inflation #markets #cpi #economy #equities

The March Consumer Price Index (CPI) data released today came in hotter than expected, with headline CPI rising 0.38% month-over-month, above the anticipated 0.3%, and core CPI increasing 0.36%, also above the 0.3% forecast. On a year-over-year basis, headline CPI accelerated to 3.48%, and core CPI ticked up slightly to 3.80%.   Digging deeper into the data, shelter costs, a significant component of CPI, rose 0.42% month-over-month and slowed to 5.65% year-over-year, the smallest gain since June 2022. However, this is still far above pre-COVID levels. Food prices saw a modest 0.10% monthly increase and remained nearly unchanged at 2.24% year-over-year. Energy posted a 1.13% monthly gain and is now up 2.13% from a year ago, the biggest rise since February 2023.   The implications of this CPI report for monetary policy suggest that the Federal Reserve may need to delay expected rate cuts. Many economists have pushed back their first cut estimate from June to July, with an every-other-meeting cadence implying two by the end of the year. Current Fed Funds Futures see it even further out, with the first cut now priced for September and potentially a second in December. However, the proximity of the September meeting to the fall election could further complicate the timing of rate cuts, potentially pushing the first cut all the way to December if the Fed decides to avoid making monetary policy changes close to the election.   Despite the concerning inflation data, there are some silver linings. Wage growth, unlike in 2021, is falling, reducing the likelihood of a 70s-type wage-price spiral. Moreover, grocery prices and goods inflation more broadly have continued to cool, providing some relief to consumers. However, services inflation remains elevated, driven in part by shelter costs.   Based on the March CPI data, core PCE inflation is likely going to come in at 0.25-0.30% m/m, implying a drop in the year-over-year reading to 2.7-2.75%. While good to see continued disinflation, this is a smaller drop than hoped for. PPI data tomorrow will give further clarity.   #inflation #economics #markets #equities #economy #cpi

The NFIB Small Business Optimism Index declined to 88.5 in March 2024, below expected 90.2 and marking the lowest level since December 2012. This decline comes despite improving consumer confidence, low unemployment, and rising real incomes in the broader economy.   A closer look at the subcomponents reveals that Inflation remains the top concern, with 25% of owners citing it as their single most important problem and a net 28% raising average selling prices (though these are down from their peaks in 2022 at 37% and 66%, respectively). The tight labor market persists, with 37% of owners reporting unfilled job openings (down from a peak of 51% in 2022). However, hiring plans are slowing down, with a net 11% of respondents planning to increase employment (lowest since May 2020!). Capital spending showed a slight improvement, but only 20% plan outlays in the next few months, suggesting a cautious outlook. Sales expectations deteriorated significantly, with a net -18% of owners expecting higher real sales volumes.   The overall index is now below the long-term median of 99.3 and the median during recessions of 92.9. This suggests that small business optimism is even worse than during past recessions. The disparity between the struggling small business sector and the strength of the broader economy is a key point of concern, especially considering that small businesses account for nearly half (46.4%) of U.S. employment.   #employment #smallbusiness #economy #nfib #economics #markets #equities #inflation

The Trade Balance widened to -$68.9bil (deficit) in February, the widest since April 2023 and compared to expectations for a -$67.3b figure. Both Exports and Imports increased. Imports are at their highest level since October 2022 and Exports are at a new all-time high!