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Mid-Week Update - 2012-04-18

Manufacturing output contracted slightly in March with overall industrial production staying flat during the month, according to a report from the Federal Reserve.  This was the second straight month in which industrial production was unchanged, but, thanks to a strong gain during January, production grew at an annualized pace of 5.4 percent during the first quarter of the year.  Manufacturing output slowed 0.2 percent during March, following gains of 0.8 percent, 1.1 percent and 1.5 percent during the previous three months with production of both durable and non-durable goods each slowing 0.2 percent during the month.  A warmer than normal March pushed utility production up 1.5 percent while mining output eked out a 0.2 percent increase.

Weather may also be driving retail spending, which grew 0.8 percent during March following increases of 0.7 percent and 1.0 percent during January and February, respectively.  Building materials retailers (i.e., home improvement/hardware stores) saw sales jump 3.0 percent (their fourth straight month of strong sales gains), while furniture and electronics/appliance retailers enjoyed gains of 1.1 percent and 1.0 percent, respectively. Retail sales were up 6.5 percent from a year earlier--more or less the same 12-month comparable seen ever since last December--with the year-to-year sales gain dropping slightly to 5.8 percent after removing both gas stations and auto dealers from the mix.

The housing market may, however, may be losing some of its recently found momentum.  The Housing Market Index from the National Association of Home Builders declined for the first time since last September.  The measure of homebuilder confidence lost three points in April to fall to a seasonally adjusted reading of 25. (A reading of 50 is the threshold between a market that is "good" and one that is "poor").  The index improved in the Northeast and was unchanged in the West, but declined in both the Midwest and the South.  The present sales index for single-family homes also lost three points to a reading of 26 while the expected sales index decreased by four points to 32.  The press release ties the decline in the index to the fact that buyers' interest to purchase homes "has yet to translate into expected sales activity."

Related, housing starts declined for the second straight month in March, falling 8.4 percent over the past two months to a seasonally adjusted annualized pace of 654,000 units.  The decline was the result of fewer starts of multi-family units (a data series that tends to be particularly volatile month-to-month).  While starts of multi-family units fell 16.9 percent from February, single-family starts were essentially unchanged.  But the story is a bit more positive as you dig deeper into the data-housing starts remained 10.3 percent above year ago levels, with starts of single-family homes up 10.5 percent from the March 2011 pace. Further, permits issued to build homes increased 4.5 percent during March to a seasonally adjusted annualized pace of 747,000 units.  This was 30.1 percent above the year ago SAAR reading.

Thursday features the March existing home sales report and the March leading indicators index from The Conference Board.  On Friday, the Bureau of Labor Statistics will provide more detailed on March employment with its regional and state employment report. Read all of this week's economic data in next Monday morning's edition of AFP EconWatch.