Finance Column » Your Money This Week » April showers and storm clouds?

April showers and storm clouds?

By Mark Hamrick ·
Monday, April 15, 2013
Posted 5 am ET

With the arrival of spring we see more thunder showers, a reminder that more volatile weather is on the way this summer.

The economy, too, has seen some clouds gathering lately. The question is whether what's brewing is worse than what's been forecast.

This past week, we got a substantially worse-than-expected March retail sales report, coupled with word of a decline in consumer sentiment. Those two dynamics, sentiment and spending, don't always go hand in hand, but they did this time. Many experts believe that the impact of the sequester (the mandatory federal budget cuts that took effect March 1), coupled with the rise in payroll taxes at the beginning of the year, are culprits to watch now and in the coming months.

More home construction

This week, the key reports include a look at a brightening spot in the economy: housing.

On Tuesday, the Commerce Department reports on March housing starts. Walter Molony, a spokesman for the National Association of Realtors, says the trend in building, is, well … building.

There should be slightly better housing starts numbers here in the second quarter of the year, compared to the first three months. Even so, the pace continues well below normal levels.

Molony says "housing starts will continue to be well above year-ago levels, somewhere between 35 (percent) to 40 percent from a year ago." He says while that sounds "dramatic," the truth is that it is more of a reflection just how low activity has been.

Monday, one day before the housing starts report, the National Association of Home Builders reports on builder sentiment.

Low inflation, weak economy

Energy prices have been falling lately, and that's good news for consumers that should be reflected in the Consumer Price Index for March, due Tuesday morning from the Labor Department. Paul Edelstein, director of financial economics for IHS Global Insight, says the key gauge of inflation at the retail level will decline 0.1 percent. The core, which excludes food and energy, is seen rising 0.2 percent.

Edelstein notes that inflation has been running well below the Federal Reserve's target of about 2 percent, as least as measured by the government. He says this should give the Fed more room to continue its policy of low interest rates and monthly asset purchases.

Smokestacks and power plants

Tuesday also brings the Federal Reserve's monthly reading on industrial production. This is a snapshot of activity at factories, mines and utilities. Edelstein says there will probably be a "mild increase" reported because of power consumption related to wintry March weather. Manufacturing is also coming off a strong first quarter of the year, helped in part by brisk demand for new cars and trucks.

Speaking of the Fed

The Federal Reserve's roundup of regional economic activity, known as the Beige Book, is due Wednesday afternoon. The book serves as preparation for the central bank's next policy-setting meeting. which begins at the end of April. Remember the weak March jobs report released earlier this month? We'll see what the Fed has been hearing about hiring activity around the country. The Beige Book might indicate whether employers are increasingly cautious. The Labor Department's weekly jobless claims numbers haven't indicated a sharp rise in layoffs. But hiring is another matter.

This week in business history

On April 18, 1923, Yankee Stadium opened. At the time, it cost a reported $2.3 million. It allowed the men in pinstripes to have their own field, having previously shared the Polo Grounds in Manhattan with the New York Giants. It has since been demolished and replaced with a new version of Yankee Stadium. Few teams in professional sports have produced more passion, both for and against. And more money. According to Forbes, the Yankees franchise is valued at $2.3 billion, with an annual operating income of $1.4 million. That's a lot of hot dogs.

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