Economic Update 03/31/14

A SENSE OF OPTIMISM ON MAIN STREET

The Conference Board’s consumer confidence index reached a six-year peak this month, climbing 4.0 points to 82.3. Analysts polled by Reuters had forecast a gain of 0.3 points to 78.6. Additionally, new Commerce Department data showed household spending rising 0.3% in February with household incomes up by the same amount. The only weak consumer signal came from the University of Michigan’s March index of consumer sentiment; it retreated 1.6 points from February to a mark of 80.0.

HOME PRICES RISE, BUT SALES INDICATORS SLIP

January’s edition of the S&P/Case-Shiller Home Price Index (surveying real estate values in 20 cities) advanced 0.8%, replicating its December gain. Annually, prices were up 13.2%. Mirroring the decline in residential resales in February, the Census Bureau reported a 3.3% drop in new home sales last month, and a 1.1% decrease over 12 months. Pending home sales fell 0.8% in February to a 28-month low, the National Association of Realtors announced. NAR’s pending home sales index was down 10.5% from a year ago.

2.6% GROWTH FOR THE FOURTH QUARTER  

Last week brought the final Q4 growth assessment from the Commerce Department; the reading was 0.2% better than the preceding estimate. Consumer spending for Q4 was revised 0.7% north to 3.3%. Another positive sign: hard goods orders increased by 2.2% in February, though the gain was only 0.2% with transportation orders removed.

TRYING WEEK FOR TECH STOCKS

The NASDAQ lost its entire YTD gain last week thanks to a 2.83% 5-day drop, taking it to a Friday close of 4,155.76. Settling at 1,857.62 Friday, the S&P 500 lost 0.48% on the week. For the blue chips, the news was slightly better. The DJIA rose 0.12% in five days to close at 16,323.06 Friday.

THIS WEEK: Monday offers no major U.S. economic releases, but Federal Reserve chair Janet Yellen speaks in Chicago and Wall Street will watch data on Japanese manufacturing and eurozone inflation. Tuesday, ISM releases its March manufacturing PMI, complementing March factory PMIs from the eurozone and China. Wednesday brings the March ADP employment change report, Commerce Department data on February factory orders and quarterly earnings from Monsanto. ISM’s service-sector PMI arrives Thursday plus the March Challenger job cuts report, fresh initial claims figures and earnings from Micron, Perry Ellis and Investors Bancorp. The Labor Department releases its March jobs report Friday.