There were lots of important reports on the U.S. economy released this morning. First, total industrial production in America jumped in February by 1.1 percent, according to new data from the Federal Reserve Board of Governors. That was significantly better than anticipated and the largest monthly gain since December 2014. Strength was broad-based in February, with large increases in mining, manufacturing, materials, construction, and business equipment easily offsetting the sharp (weather-related) drop in utilities. Further, capacity utilization, sometimes used as a leading indicator of inflation and potential output, rose to 78.1 percent last month, the best reading in three years.
Next, privately-owned housing starts in February grew at a seasonally adjusted annual rate of 1.236 million units, according to a new report from the U.S. Census Bureau. That was a 7.0 percent decrease from January’s upward-revised print and much worse than economists expected. All of the weakness was due to a 28.0 percent plunge in multi-family starts (rentals), while single-family housing starts posted a healthy 2.9 percent gain. Regionally, housing starts rose in the Midwest (+7.6 percent) and fell in the Northeast (-3.5 percent), the West (-12.9 percent), and the South (-7.3 percent). As for building permits, this metric of future construction activity also softened last month, but again the weakness was concentrated among rental properties. NAHB Chairman Randy Noel added that “Homebuilders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market. However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.”
Elsewhere, the latest job openings and labor turnover survey (JOLTS) from the Bureau of Labor Statistics showed that there were 6.312 million job openings in America in January (lagged release). That was much better than expected and a new all-time high. Most of the new job openings in January were found in the professional and business services (+215,000), transportation, warehousing, and utilities (+113,000), and construction (+101,000) industries. The number of unemployed Americans per job opening rose slightly in January, and the ratio of quits to layoffs and discharges declined. Both measures, though, remain near the best readings on record and signal an overall tight labor market with U.S. workers increasingly willing to give up their current job security for better employment opportunities (upward pressure on wages).
Finally, consumer confidence firmed this month, according to new data from the University of Michigan. Specifically, the headline sentiment gauge rose to 102.0 in March, the highest reading since 2004. Under the hood, Americans’ views of both current and future economic conditions improved this month, with the former climbing to a new record. Near-term inflation expectations, though, jumped to the highest level since 2015, and anticipated income gains for the year ahead declined. Further, President Trump’s tariffs on imported steel and aluminum received unfavorable mentions by consumers in this month’s survey, although this was largely offset by favorable mentions of the tax cuts. Survey of Consumers chief economist Richard Curtin added that “the data suggest that the relative lull in consumption in the first quarter may persist for another quarter.”
Sources: Econoday, FRBG, Bloomberg, ZH, U.S. Census Bureau, NAHB, U.S. DoL, UoM, FRBSLPost author: Charles Couch