Money Talk Podcast, Friday April 5, 2019
Landaas & Company newsletter, April edition now available.
Advisors on This Week’s Show
(with Max Hoelzl and Joel Dresang)
Week in Review (April 1-5, 2019)
Significant economic indicators & reports
A key measure of consumer spending—which drives about two-thirds of U.S. economic activity—showed weakness in February. The Commerce Department said retail sales fell 0.2% from January, which had a stronger gain than originally estimated. Of 13 retail categories, seven had lower sales in February, led by building supply centers, electronic stores and grocers. Increased sales at car dealers and gas stations kept the February decline from looking worse.
U.S. manufacturers expanded for the 31st consecutive month in March and a stronger pace than in February. Purchasing managers surveyed for the ISM Manufacturing Index indicated growth especially in hiring and new orders. Of 18 industries surveyed, 16 reported expansions in March.
The Commerce Department said construction spending hit an annual rate of $1.32 trillion in February, up 0.1% from January and 1.1% ahead of the year-ago pace. Investments in residential construction rose 0.7% for the month but fell 3.6% from February 2018. Government spending on construction grew in both periods.
In a separate report, Commerce said business inventories rose 0.8% in January, outpacing the 0.3% growth in sales. As a result, the inventories-to-sales ratio continued to climb, as it has steadily since mid-2018. Although inventory increases contribute to economic growth calculations, if supplies get too far ahead of demand it suggests companies could struggle with economic downturns. Since January 2018, inventories grew 5.3%, vs. 2.8% for sales.
The Commerce Department reported that durable goods orders shrank 1.6% in February, the first decline in four months. The setback coincided with the first decline in four months for orders of commercial aircraft. Orders for non-military capital goods excluding aircraft—a proxy for business investments—fell for the third time in four months and the fifth time in seven months.
The annual sales pace of motor vehicle sales rose in March , surprising forecasters. The sales rate hit 17.5 million vehicles, up 5.7% from February and up 1.4% from the year before, according to data from the Bureau of Economic Analysis. Sales of light trucks continued to outpace cars, up 4.4% from March 2018, vs. a 5.3% decline for cars. For the first three months of 2019, automotive sales posted their slowest quarter since mid-2017.
At a slower pace, service-sector businesses expanded in March for the 110th month in a row, according to the Institute for Supply Management Non-Manufacturing Index. The largest segment of the U.S. economy is suggesting that the nation’s gross domestic product is expanding at a 2.6% annual rate, the trade group said. Amid the slowdown, surveyed purchasing managers said they remain optimistic overall about business conditions and the economy though concerned about hiring and capacity constraints.
The four-week moving average for initial unemployment claims fell for the fifth time in six weeks, reaching its lowest level since October, hovering around 50-year lows. The measure remains 40% below the all-time average, which it has been below every week since early 2013, according to Labor Department data. The persistently low level of jobless claims is evidence that employers are reluctant to let workers loose amid a tight labor market.
Employers added a higher-than-expected 196,000 jobs in March, raising the record length of payroll expansions to 102 consecutive months. The Bureau of Labor Statistics revised estimates showing an additional 14,000 jobs in January and February, bringing the first-quarter monthly average to 180,000, down from the 2018 average of 223,000. Average wages rose 3.2% from the year before – the sixth month in a row above 3%, which hasn’t happened for a decade. The bureau’s separate survey of households estimated unemployment at 3.8%. A measure that includes gauges of underemployment remained at its lowest level in 18 years.
Where the Markets Closed for the Week
- Nasdaq – 7,939, up 209 points or 2.7%
- Standard & Poor’s 500 – 2,893, up 58 points or 2.1%
- Dow Jones Industrial– 26,425, up 496 points or 1.9%
- 10-year U.S. Treasury Note – 2.5%, up 0.09 point