United States Retail March 2019

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Despite unexpected strength in consumer spending, Thursday’s report on retail sales caused a little reaction. Beyond that, major economic news was scarce this week, and mortgage rates ended nearly unchanged. 

Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a closely watched indicator of growth each month. In March, Retail Sales jumped 1.6% from February, which was far above the consensus forecast of 1.0% and the largest monthly increase since September 2017. This followed a small decline in February. The wide swings in consumer spending seen in recent months likely have been due to several factors. Unusually high levels of volatility in the stock market during the fourth quarter were one reason. The government shutdown which took place in December and January was another. In addition, the size and the pace of issuance of tax refunds this year have played a role. Changes in the withholding tables have resulted in smaller refunds on average, and the IRS has been a little slower than usual in distributing them.

The most recent release of the monthly survey of homebuilder confidence from the National Association of Home Builders (NAHB) showed a further rebound from the weakness seen at the end of last year. During the fourth quarter, the index unexpectedly plunged from the upper 60s to the mid-50s, but it has since returned to levels around the current reading for April of 63. When the index is above 50, it generally indicates positive sentiment among home builders.

Looking ahead, Existing Home Sales will be released on Monday and New Home Sales on Tuesday. Durable Orders, an important indicator of economic activity, will come out on Thursday. First quarter GDP, the broadest measure of economic growth, will be released on Friday. In addition, news about trade negotiations between the U.S. and China could affect mortgage rates. Mortgage markets will be closed on April 19 in observance of Good Friday.