The Consumer Confidence Index from the Conference Board rose from 61.9 in March to 68.1 in April. This brings the index essentially back to where it was in February, when it stood at 68.0, but it is below the 73.1 reading observed in October. In short, sentiment appears to have improved of late, even as it is not quite where we would like for it to be. This is largely consistent with a similar survey from the University of Michigan and Thomson Reuters, which was released last week.

Noting this month’s improvement, Lynn Franco, the Director of Economic Indicators at the Conference Board, cautioned that “… consumers’ confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester. Thus, while expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend.”

Specifically, the Conference Board noted that opinions about the current and future economy have advanced in April, with the largest gain seen in the forward-looking measure. The expectations component of the index rose from 63.7 to 73.3 for the month, above the level seen in February (72.4). With that said, Americans remain largely frustrated with the labor market, with a net increase in the percentage of those who feel that jobs are hard to get.

The importance of these types of surveys, of course, is how they translate into consumer spending patterns. Yesterday, we learned that retail sales growth eased in March, with higher payroll taxes and persistent anxieties slowing purchases. The Conference Board’s survey found that some of this uneasiness continued into its respondents’ buying plans. The percentage of those planning to purchase autos and appliances were down slightly; whereas, home buying intentions were unchanged.

Chad Moutray is the chief economist, National Association of Manufacturers.

The Census Bureau reported that retail sales declined 0.4 percent in March, somewhat offsetting February’s 1.0 percent increase. One of the principal movers of the data in the last two months was sales at gasoline stations. The change in retail sales at gas stations in February and March was +5.4 percent and -2.2 percent, respectively.

These shifts can be explained by volatility in petroleum prices. Here are the average prices of West Texas Intermediate crude oil per barrel for the last four months: December, $88.66; January, $94.69; February, $95.32; and March, $93.05. As such, at least part of the decrease in retail sales could be explained by lower gasoline prices.

However, the rest of the release reflects broader weaknesses that go beyond petroleum prices. One of the faster sectors for growth recently has been auto dealer sales, which have risen 7.8 over the past 12 months. In March, though, motor vehicle and parts sales dropped 0.6 percent, falling back a little from the 1.3 percent rise in February. Likewise, we also saw declines in the following store types: electronics and appliances (down 1.6 percent), general merchandise (down 1.2 percent), sporting goods and hobbies (down 0.8 percent), health and personal care (down 0.3 percent), and food and beverage (down 0.1 percent).

There were some types of businesses that did experience sales increases in March. Examples include furniture and home furnishings stores (up 0.9 percent), miscellaneous store retailers (up 0.8 percent), restaurants and bars (up 0.7 percent), and non-store retailers (up 0.3 percent).

In summary, the retail sales numbers were disappointing overall for March. There are a number of factors that have been listed as possible reasons, including lower gasoline prices, higher payroll taxes, and cold weather. Moreover, to some extent, March’s weaker data might be a counterbalance to the surprisingly strong February report.

Regardless of the explanations, retail sales have risen 2.8 percent year-over-year. That represents a deceleration from the 4.4 percent rate observed the month before and the 5.4 percent rate seen six months ago (in September). This perhaps suggests that consumers have pulled back a little in their spending, which could be consistent with the payroll tax increase as well as reduced consumer confidence numbers.

Chad Moutray is chief economist, National Association of Manufacturers.

Here is the summary from this week’s Monday Economic Report:

Some of the indicators released last week helped confirm the belief that the U.S. economy has started 2013 on a stronger-than-expected note. First, industrial production rose 0.8 percent in February, led by strong demand for automobiles and other goods. This was a decent turnaround from much weaker numbers in January, with all but three major manufacturing sectors experiencing higher production. Second, retail sales rose a surprisingly healthy 1.1 percent in February. While much of that growth stemmed from higher gasoline prices and higher motor vehicle sales, the data suggested modest growth overall, with Americans continuing to make modest gains in purchases despite headwinds from higher taxes and fiscal uncertainties.

At the same time, those headwinds appear to be having some negative impacts. Industrial production was increasing at a 5.1 percent year-over-year pace at this point last year; today, that rate is 2 percent. That example can be replicated in so many of the recent indicators. For instance, the NAM/IndustryWeek Survey of Manufacturers reported an uptick in optimism in the latest survey, with sales expected to grow 2.3 percent over the next year. That represents an improvement from three months ago (when the rate was 1.0 percent), and the percentage of respondents who were positive about their own company’s outlook rose from about 52 percent in December to roughly 70 percent today. But this is a come-down from the stronger pace of nearly 5 percent growth in annual sales expected in March of last year (when approximately 89 percent were positive in their outlook). Clearly, more work still needs to be done to get the economy moving. (continue reading…)

The Census Bureau said that retail sales rose a surprisingly strong 1.1 percent in February. This was the fourth consecutive monthly increase and builds on a much smaller 0.2 percent gain in January. That month’s weaker increase was largely attributed to higher taxes. Still, retail sales have risen a decent 7.8 percent between February 2012 and February 2013.

One of the larger increases in the past two months has been sales from gasoline stations. These have risen 3.6 percent and 5.0 percent, respectively, in January and February. This was due to higher petroleum prices, with the price per barrel of West Texas Intermediate crude oil rising from $88.25 on average in December to $94.69 in January to $95.32 in February. Excluding gasoline stations, retail sales would have risen by 0.6 percent.

February’s number was also boosted by strong auto sales, which rose 1.1 percent for the month. Motor vehicle and parts sales have improved over the past few months, especially since October. Year-over-year gains have been up 7.8 percent. If you exclude gasoline and autos from the analysis, retail sales increased 0.4 percent. This indicates a more modest gain than the headline figure.

Other retailers with higher monthly sales included miscellaneous store retailers (up 1.8 percent), nonstore retailers (up 1.6 percent), building materials and garden supply stores (up 1.1 percent), and food and beverage stores (up 0.8 percent). Weaknesses were seen among furniture and home furnishings stores (down 1.6 percent), department stores (down 1.0 percent), sporting goods and hobby stores (down 0.9 percent), and restaurants and bars (down 0.7 percent).

Chad Moutray is chief economist, National Association of Manufacturers.

Here is the summary of this week’s Monday Economic Report:

The Federal Reserve Board’s Beige Book, released last week, noted some improvements in the economy since last month. The United States is growing modestly, and inflation appears to be in-check, at least for now. This latter point was also confirmed in the most recent price data from the Bureau of Labor Statistics. Yet, the Beige Book also cited weaknesses in the manufacturing sector in many of its districts, with activity mixed and firms hesitant to hire. In fact, the labor market description showed the softer manufacturing market:

The Boston, Richmond, Atlanta, Chicago, Kansas City and San Francisco Districts all reported delayed hiring, often in defense manufacturing, due to fiscal cliff uncertainties. Companies in the Chicago District with trade or investment exposures to Europe reduced their hiring plans as well. Chicago reported that manufacturers are choosing to cut hours instead of reducing headcount in expectation of production rebounds in 2013. Atlanta and Kansas City cited health-care policy changes and costs as another cause for minimal hiring. On the other hand, the New York, Atlanta, Minneapolis and Dallas Districts saw the labor market firming modestly. Finally, contacts in several districts reported difficulties finding qualified workers in some specialized fields, such as skilled manufacturing, energy and IT.

Many other data points out last week tended to echo these weaknesses. Both the New York and Philadelphia Federal Reserve Banks found contracting sales, inventories and employment levels in their respective districts. The Philly survey cited slower sales growth, the desire to keep costs low and uncertainties related to health care and the U.S. fiscal situation as the top reasons why manufacturers were holding back on hiring. Despite this, manufacturing production increased 0.8 percent in December, building on November’s 0.6 percent gain. Hurricane Sandy might explain part of this increase, but modest consumer spending growth was probably also a factor. Retail sales rose 0.5 percent for the month and 4.7 percent for the year. Still, even with these gains, manufacturing production was much slower in the second half of the year compared to the first half.

The residential construction sector continues to be a bright spot, with housing starts soaring to 954,000 at the annual rate in December. This represents a 36.9 percent increase year-over-year and is a clear indication that housing is recovering. Freddie Mac reported that the average 30-year mortgage rate fell to 3.38 percent—a major contributor to the recent progress in the residential market—and home builder confidence continued to grow throughout the year. I expect for housing starts to exceed 1 million units by year’s end—a major accomplishment, even as it remains well below the 2.1 million homes built in 2005 and 2006. Despite this upward movement, challenges remain, especially regarding tougher lending standards and persistent financial challenges for would-be buyers.

This week, we will learn more about the domestic and global manufacturing situation. Surveys from the Kansas City and Richmond Federal Reserve Banks will build on their mixed findings in December. Last month, the Kansas City District had declining activity for the third straight month, whereas the Richmond area noted positive growth, albeit at a slower pace. Hopefully, both districts report stronger production and sales levels to begin the new year. Meanwhile, Markit will report its “flash” Purchasing Managers’ Index (PMI) for the United States, China and Europe. The most recent PMI data continue to show signs of weakness in the Eurozone, with even Germany experiencing declines. This contrasts with the United States and China, which have shown some signs of progress, despite growing only modestly at best. I would expect those same trends to continue.

Chad Moutray is the chief economist, National Association of Manufacturers.

Below is the summary from this week’s Monday Economic Report:

The Federal Reserve noted the U.S. economy has seen some modest improvements during the past month, with a number of indicators highlighting this progress. Hurricane Sandy had an impact, both in slowing down activity in October and increasing it in November in its aftermath. Industrial production rose 1.1 percent in November, recovering from October’s 0.7 percent decline, with repairs from the storm possibly explaining at least some of these gains. Similarly, retail sales also rebounded for the month, led by strong auto sales and spending on appliances, building materials, furnishings and clothing. Lower petroleum costs also helped to ease Americans’ pocketbooks, with gasoline station sales down 4 percent in November on lower prices.

Despite the optimistic news on production and sales, major headwinds confront businesses and consumers. Manufacturing production remains 0.6 percent below July’s levels, a reflection of the weaker economic environment during the past few months. These headwinds mostly stem from uncertainties related to the fiscal cliff and the impact of a slowing global economy on international orders. The trade balance widened in October on reduced exports and imports. While year-to-date manufactured goods exports are higher than last year, they reflect significant easing in trade volumes, resulting from a weakened economic environment among our major trading partners. Meanwhile, in the United States, small business owner confidence plummeted last month on worries about the political environment and diminished expectations for sales, earnings, inventories and capital spending.

High unemployment rates and challenges to the U.S. and global economies are persistent worries for the Federal Reserve Board. The Federal Open Market Committee (FOMC) voted to purchase $85 billion in mortgage-backed and long-term securities each month in an effort to push down long-term interest rates and stimulate economic growth. Moreover, it will continue to do so until the unemployment rate hits 6.5 percent or forecasted inflation exceeds 2.5 percent. These economic indicator targets replace earlier language about maintaining these policies through mid-2015. Still, in practicality, the Fed does not expect the unemployment rate to reach 6.5 percent until 2015, according to its forecasts, suggesting that it will continue to pursue these policies for the foreseeable future.

The fact that inflation remains in-check, at least for now, facilitates the Fed’s willingness and ability to stimulate growth. Consumer and producer pricing data released last week back this up, with lower energy costs helping to ease cost pressures. Core consumer prices have risen 1.8 percent over the past 12 months, and manufacturing raw material costs—down 1.2 percent in November—have risen just 1.0 percent year-over-year. These rates are significantly lower than earlier in the year.

This week, we will learn more about regional manufacturing activity and housing. Surveys from the Kansas City, New York and Philadelphia Federal Reserve Banks—which all indicated a contraction last month—will likely show the sector continuing to struggle. Housing starts data, on the other hand, should continue to illustrate strength in the residential construction sector. Other highlights for the week include data on leading indicators, a second revision to GDP and personal spending.

Note: Due to the holidays, the next report will be released on Wednesday, December 26. There will be no report issued during the week of December 31. The schedule will resume on Monday, January 7, 2013.

Chad Moutray is the chief economist, National Association of Manufacturers.

The Census Bureau said that retail sales fell 0.3 percent in October, its first decline since June. The decline was led by lower motor vehicle sales, which fell 1.5 percent for the month. Despite reduced auto sales in October, the sector is up 5.0 percent year-over-year.  Excluding autos, retail sales figures were flat for the month.

The largest gains for the month came from gasoline stations, with sales rising 1.4 percent. Since October 2011, gas station sales have risen 7.7 percent. Much of this increase was due to higher per gallon prices at the pump. In essence, the gasoline station sales increase offsets lower auto sales, as when the two are excluded from the analysis, retail sales decline 0.3 percent.

Outside of gasoline and motor vehicles, retail sales were mostly mixed. There were increased sales in October observed in food and beverages (up 0.8 percent), sporting goods and hobbies (up 0.5 percent), health and personal care stores (up 0.3 percent), and general merchandisers (up 0.2 percent) businesses. At the same time, declines were seen among the following retailers: building materials (down 1.9 percent), nonstore retailers (down 1.8 percent), electronics and appliances (down 1.0 percent), and furniture and home furnishings (down 0.6 percent).

These figures suggest lackluster growth in retail spending in October. There were some extenuating circumstances that might account for some of this decline, including Hurricane Sandy and a reduction in sales in October for the iPhone 5 (which was introduced in September to strong sales). These factors make the decline harder to interpret. (continue reading…)

The Census Bureau said that retail sales rose a strong 1.1 percent in September. This builds on the healthy 0.7 percent and 1.2 percent gains in July and August, respectively, which should bode well for second quarter consumption and GDP figures. In general, the consumer has continued to spend, despite a number of economic headwinds, with year-over-year retail sales up 4.8 percent.

The primary driver of increased sales in September was the new iPhone. Retail spending in the electronics and appliances sector was up 4.5 percent. Outside of electronics, the other leading sectors were gasoline stations (up 2.5 percent), non-store retailers (up 1.8 percent), motor vehicles (up 1.3 percent), food and beverages (up 1.2 percent), and building materials (up 1.1 percent). Department store sales were the only weak area, down 0.2 percent.

In general, higher retail sales figures match up with other recent economic indicators, including data on personal spending and consumer confidence. Even with slowing global growth and uncertainties in the U.S. regarding the fiscal cliff, Americans remain cautiously positive about the future, with modest gains in spending. This might seem counterintuitive, and yet, it appears that consumers have yet to react to the fiscal cliff or other economic pressures, perhaps even discounting them.

Chad Moutray is chief economist, National Association of Manufacturers.

Consumers increased their spending levels in August, according to the latest Census data. Retail sales rose 0.9 percent in August, building on the 0.6 percent jump in July. This was the second consecutive month of higher spending following three months of declines. This is good news, but the increase was largely driven by gasoline station sales, which were up 5.5 percent on mostly higher petroleum prices. If you exclude gasoline from retail sales figures, the increase in August shrinks to 0.3 percent.

The second largest driver of growth in retail sales last month was in the motor vehicle and parts sector, up 1.3 percent. This follows a few months of relative weakness in auto industry sales, with August’s growth rate the fastest since February. Excluding autos and gasoline, retail sales grew just 0.1 percent, suggesting the broader consumer market was weaker in August than the strong headline number might suggest.

Aside from autos and gasoline, areas of strength for retail spending included building materials (up 1 percent), food and drinking places (up 0.5 percent), and furniture and home furnishings (up 0.3 percent). Declining sectors were electronics and appliances (down 1.4 percent), general merchandisers (down 0.3 percent), and clothing and accessories (down 0.1 percent). Several components reflected unchanged spending from July, including food and beverages, sporting goods, and nonstore retailers. (continue reading…)

After declining for three straight months, consumers increased their spending in July. The Census Bureau reported that retail sales rose 0.8 percent in July, reversing the 0.7 percent decline the month before. In general, an anxious American population had begun to pull back a little; with these numbers, it suggests that consumers are returning to modest gains in spending – at least for the month of July. Some of this gain could be pent-up demand, following three months of hesitancy toward spending.

Gasoline station sales had led the decline in previous months, but in July, we started to see some price increases. As a result, gasoline stations saw increase spending of 0.5 percent for the month. The largest gains, though, were seen in sporting goods and hobbies (up 1.6 percent), nonstore retailers (up 1.5 percent), furniture and home furnishings (up 1.1 percent), building materials (up 1 percent), electronics and appliances (up 0.9 percent), clothing and accessories (up 0.8 percent), and food service and drinking places (up 0.8 percent). As such, this was a broad-based increase in retail sales for the month.

Increased consumer spending should bode well for additional manufacturing production, assuming these gains can be sustained moving forward. Year-over-year retail sales are now up 4.1 percent. This is up from 3.5 percent in June but still lower than the 6.8 percent rate observed in December. This suggests that there is still more room for spending to grow, even as these figures are a positive sign. (continue reading…)