Volume 25, Number 11 Economic Highlights for the Week Ending March 15, 2019

MONDAY, March 11th
Retail sales rose just 0.2% in January after a downwardly revised decline of 1.6% in December. High volatility could be related to the holidays, the weather and or the government shutdown which impacted consumer confidence and spending. One thing for certain, now that the data is coming out to show it, is that economic activity fell off sharply at the end of last year and picked up moderately in January. Sales fell sharply in January at auto dealers and gasoline stations, so core sales excluding those two components rose 1.2%. Gas station sales were down because of lower oil prices and auto sales have been pulling back from robust sales in mid-2018. Sales also fell at apparel, furniture, and electronics and appliance stores. Strength in core sales was broad-based led by sporting goods and hobby stores, building supply stores and non-store or ecommerce retailers. In January, Sales were 2.3% above their year-ago level, up from December’s revised 1.6% growth while core sales were up 3.7% from January of last year.
TUESDAY, March 12th
The NFIB small business optimism index inched higher in February, rising from 101.2 to 101.7. The index is holding at a level that indicates subdued optimism among small business owners. Some of the details in this survey weakened as hiring plans slipped last month along with plans to raise worker compensation. Expectations for the economy to improve rose in February but only gained back half of January’s decline while slightly more firms indicated plans to make capital expenditures in the next six months. Like the consumer, it looks as though small business optimism has taken a hit and not fully recovered yet.
The consumer price index rose 0.2% in February after being unchanged in the prior three months. Despite the gain, the CPI was up just 1.5% from February 2018. Food and energy prices both rose 0.4% last month; excluding them, the core CPI rose just 0.1% on the month and is now up 2.1% on the year. Inflation is not an issue for the Fed who will remain patient before adjusting monetary policy.
WEDNESDAY, March 13th
The MBA mortgage applications index rose 2.3% for the week ending March 8. The purchase index moved 4.3% higher last week as the refinance index edged 0.2% lower. The purchase index is up nearly 2% year-over-year in a positive sign for the spring selling season. The report notes that loan sizes are bigger, indicating that high-end buyers, not first-time buyers are in the market. Contract mortgage interest rate moved lower last week with the 30-year fixed rate for conforming loans was down 3 bps to 4.64%.
THURSDAY, March 14th
Jobless claims rose 6k to 229k for the week ending March 9. Claims remain very low and steady. The 4-week moving average was down 2500 last week to 223,750 which could be an early indication of monthly strength in the employment report for March following an anomalous 20k job gain in February.
New home sales decreased 6.9% in January to an annual rate of 607k following an upwardly revised gain of 3.8% in December and a rate of 652k New home sales data released today were more than month late due to the government shutdown. Smoothing out the volatility, the 3-month average of 629k in new home sales does help brighten the housing market outlook. Regionally, new home sales fell in all areas of the county, except for the West where they surged 27.8%. Inventories of new homes available for sale fell 1.5% on the month to 336k, which represents a 6.6-month supply at the current sales pace. With ample supply on the market, new home prices downshifted over the past year with the median price for a new home down 3.8% to $317,200. Strong jobs, stable rates, softer pricing should add up to a more positive outlook for new home sales, as well as the broader housing market going forward.
FRIDAY, March 15th

Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 25848.87 25450.24 +398.63 or +1.57%
NASDAQ 7688.53 7408.14 +280.38 or +3.78%

The FOMC meets in the coming week where it is widely expected for the Fed to hold steady on rates. The statement is expected to reflect a more dovish stance after hiking 4 times last year. From the housing market, we have homebuilder sentiment on Monday and existing home sales on Friday.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 5.50 5.00 4.50
Fed Discount 3.00 2.50 2.00
Fed Funds 2.40 1.92 1.42
11th District COF 1.125 1.018 0.777
10-Year Note 2.59 2.97 2.84
30-Year Treasury Bond 3.01 3.11 3.08
30-Yr Fixed (FHLMC) 4.31 4.60 4.44
15-Yr Fixed (FHLMC) 3.76 4.06 3.90
6-Mo Libor (FNMA) 2.68575 2.53563 2.22375

Sources: IBC's Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

Upward pressure on interest rates
Downward pressure on interest rates
No pressure to change interest rates
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