Consumers across the nation stepped up spending in March after dismal spending in the beginning of the year, due to the severely harsh winter weather. Retail Sales rose by 1.1% last month, the biggest gain since September 2012, while February’s 0.7% rise was revised up from 0.3%. Retail Sales account for 1/3 of consumer spending and consumer spending accounts for about 2/3s of the U.S. economy.
Home loan lending declined in the first quarter of 2014 due to rising interest rates and home prices. Total lending came in at about $226 billion, the lowest level since 1997 and less than one-third of the 2006 average. Home loan rates are up from the best levels seen early in 2013 after the Federal Reserve began to taper its massive stimulus program. Wells Fargo recently reported that its home-loan originations fell to $36 billion in the first quarter after it exceeded $100 billion for seven straight quarters through June 2013.
Banking giant Citigroup reported first quarter earnings of $3.9 billion or $1.30 per share, easily beating the $1.14 per share estimated by Thomson Financial Research. The gains were due in part to solid performances from its consumer and international businesses. In addition, the bank also grew both loans and deposits, while holding the line on its expenses.
The National Federation of Independent Business (NFIB) reported this morning that its small business optimism index rose 2 points to 93.4. The gains reversed the declines seen in February, but has failed to breach the 95 level that has capped the Index during the economic recovery. Six of the components improved, two were unchanged and two were lower. A spokesman for the NFIB said “the economy is at least crawling forward and not heading in reverse.”
The spring home buying season is underway and recent data has showed that the housing market has softened a bit. However, Fannie Mae released its National Housing Survey for March yesterday showing that consumer attitudes have continued to move in a positive direction in the past year, which could signal a pickup in home buying and selling activity this spring. The survey revealed that respondents who say it is a good time to sell rose to 38% from 26% at the same time last year.
The Bureau of Labor Statistics (BLS) reported its JOLTS (Job Openings and Labor Turnover Survey) today showing that there were 4.2 million job openings on the last day of business in February, up from the 3.9 million in January. The BLS went on to say that there were 4.6 million hires in February, little changed from January. Over the 12 months ending in February, the number of hires (not seasonally adjusted) changed little for total nonfarm, total private, and government.
The employment picture got a little clearer this morning after the Labor Department reported that there were 192,000 new jobs created in March, which was just below the 195,000 that was expected. The harsh winter weather kept job creations low in December, January and early February averaging 144,000 per month. Now that spring is in the air, employers may begin to ramp up hiring efforts.
The March Jobs Report also revealed that the Unemployment Rate held steady at 6.7% as more people tried to enter the labor force. The Labor Force Participation Rate (LFPR), which measures the proportion of working-age Americans who have a job or are looking for one, rose to 63.2% from 63.%. The report said that every industry except manufacturing added jobs.
With the spring home buying season upon us, the market is seeing too few people are selling homes, and too few buyers can afford the homes that are for sale. In addition, higher home prices and all cash buyers are squeezing first time home buyers. The one bright point in the equation – lenders are easing the tight money lending standards that have been seen in the past few years as qualifying for a home loan could get a little easier.
Americans’ attitudes towards the economy fell to lows not seen since November as higher heating and gasoline costs put a strain on household budgets. The March Consumer Confidence Index came in at 80.0, which was inline with estimates and the February reading. Economic data in 2014 has been a bit disappointing, but the harsh winter weather could have been the reason. As spring blooms, consumers will be looking for signs of more positive economic data, which would confirm that the weather had a big impact on the early year tepid economic numbers.
Consumer spending rose by the most in three months in February on services such as health care and utilities. Personal Spending rose by 0.3% last month, which was inline with estimates. Personal Income also rose by 0.3% last month, which also matched estimates. Within the data it showed that the personal savings rate edged up to a four month high of 4.3% from 4.2% in January. In addition, inflation remained tame as evidenced by a 0.1% rate in the Core Personal Consumption Expenditure, the Federal Reserves favored gauge for inflation.
In an effort to brew up some business, fast food giant McDonald’s will be offering free small cups of coffee at no charge during breakfast hours from March 31 through April 13. The world’s largest restaurant chain is rolling out the campaign for the first time to lure in new customers and to get existing customers to come in more frequently. The company is figuring that it’s likely that those stopping in for the free coffee will purchase a breakfast sandwich or other items.
Americans filing for first time unemployment benefits fell to lows not seen since late November, signaling an uptick in the labor market. The Labor Department reported that Weekly Initial Jobless Claims fell by 9,000 in the latest week to 315,000, which was below the 329,000 that was expected. As the country moves out of the unbearable cold weather and massive snowstorms, the sector could be on its way to greener pastures.
In the foreclosure arena, RealtyTrac reported that foreclosure activity across the nation fell to its lowest level in more than seven years, due in part to the rise in home equity. February foreclosure starts fell by 9% from January to February and are down a whopping 27% from one year earlier. However, 14 states saw an increase in foreclosure starts last month, with New Jersey seeing an increase of 126% from a year ago.
The Commerce Department reported on Thursday that after falling for 2 months, Retail Sales rose by 0.3%, above the 0.2% expected in February, as consumers purchased a variety of goods, despite the harsh winter weather last month. When stripping out autos, sales also rose by 0.3%, above the 0.2% expected. Retail Sales make up about 1/3 of consumer spending, the main driver behind economic growth. If consumer spending can continue to expand, economic growth will continue to increase.
As the spring and summer driving seasons near, one thing is for certain – higher gas prices at the pump. The national average price for a regular gallon of gasoline is $3.48, up from $3.28 a month ago as prices have increased 28 straight days. AAA predicts that prices will rise an additional 10 to 20 cents this spring and could rise more if the tensions in the Ukraine ramps up. Russia is the third largest oil producing country behind Saudi Arabia and the U.S. and any disruptions could cause oil prices to increase.
The Bureau of Labor Statistics reported this morning that its JOLTS report, Job Openings and Labor Turnover Survey, revealed that job openings rose by 1.5% from December to January. The report may not have as much impact as the monthly Jobs Report, but it does give insight into the labor market on hires, quits, layoffs and job openings. The report is also closely watch by newly appointed Fed Chair, Janet Yellen.
Fast food chain McDonald’s reported a larger than expected decline in comparable global sales in February, once again hurt by slowing sales in the U.S. Reports from restaurants said worldwide sales for stores open at least 13 months fell by 0.3%, below the -0.1% expected. McDonald’s said that sluggish economic growth, internal missteps, rising record beef prices, along with higher labor costs, are the hurdles that are hurting sales.