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Economy in Brief

Housing Starts Fell Again
by Tom Moeller March 16, 2004

Housing starts fell 4.0% last month and added to the 6.3% drop in January. February starts of 1.855M were the lowest since last August. Consensus forecasts had been for 1.93M starts in February.

Single family starts fell 4.1%, the third consecutive monthly decline.

Multi-family starts fell 3.4% and are off 9.9% during the last two months.

Starts were mixed across the country's regions last month. Housing starts fell hard m/m in the South (+10.5% y/y) and also were down in the West (+4.1% y/y). Starts rose 25.3% m/m in the Northeast (32.4% y/y) and rose in the Midwest (+25.1% y/y), recovering from the January cold snap.

Building permits fell a moderate 1.5% m/m (+6.6% y/y) for the second month.

Housing Starts (000s, AR) Feb Jan Y/Y 2003 2002 2001
Total 1,855 1,932 13.1% 1,848 1,711 1,601
  Single-family 1,489 1,553 13.5% 1,501 1,364 1,272
  Multi-family 366 379 11.6% 347 347 330
Building Permits 1,903 1,932 6.6% 1,831 1,750 1,637
Housing Market Index Unchanged
by Tom Moeller March 16, 2004

The Composite Housing Market Index reported by the National Association of Home Builders (NAHB) was unchanged in March at 64 versus February which was revised down slightly. It was the lowest level for the index since last June.

During the last fifteen years there has been a 79% correlation between the y/y change in the NAHB index and the change in single family housing starts.

The sub index which measures expected home sales in six months fell to the lowest level since June.

The index of current market conditions for home sales fell 2.8% m/m to 69 (+16.9% y/y).

Traffic of prospective buyers rose slightly m/m in March but still was off 12.7% from the August peak.

The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.

Visit the National Association of Home Builders using this link.

Nat'l Association of Home Builders Mar Feb 3 '03 2003 2002 2001
Composite Housing Market Index 64 64 52 64 61 56
Chain Store Sales Up Modestly
by Tom Moeller March 16, 2004

Chain store sales rose a modest 0.5% last week and recovered all of the prior week's 0.3% dip, according to the ICSC-UBS survey.

Sales so far in March are up 0.2% versus the February average.

During the last ten years there has been a 59% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and the change in non-auto retail sales less gasoline.

The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

ICSC-UBS (SA, 1977=100) 03/13/04 03/06/04 Y/Y 2003 2002 2001
Total Weekly Retail Chain Store Sales 438.6 436.6 7.0% 2.9% 3.6% 2.1%
Manpower Index of US Hiring Intentions Up Sharply
by Tom Moeller March 16, 2004

The Manpower survey of hiring intentions in the US for 2Q04 improved sharply. A seasonally adjusted net 20% of 16,000 employers expect to increase hiring activity. It was the highest level for hiring intentions since 1Q 2001.

The latest reading is up from 13% in 1Q and from 7% in 3Q03. Hiring typically picks up in 2Q, therefore seasonal adjustment factors damped the increase in the seasonally adjusted index.

Since 1980 there has been a 75% correlation between the Manpower index and the y/y change in non-farm payrolls.

The latest press release from Manpower Inc. covering employment prospects in North America can be viewed here.

Manpower Employment Survey 2Q04 1Q04 2Q03 2003 2002 2001
All Industries - Net Higher (SA) 20 13 11 11 11 17
FOMC Left Rates Unchanged
by Tom Moeller March 16, 2004

As expected, the Federal Reserve left the target rate for federal funds unchanged at 1.00%. The discount rate also was left unchanged at 2.00%.

The decision was unanimous.

The press release which accompanied the Fed's action indicated that "The evidence accumulated over the intermeeting period indicates that output is continuing to expand at a solid pace. Although job losses have slowed, new hiring has lagged."

Regarding inflation, the Fed indicated that "The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation."

The complete text of the Fed's latest press release can be found here.

"How the Fed Affects the Economy: A Look at Systemic Monetary Policy" from the Federal Reserve Bank of Philadelphia is available here .

"Macroeconomic Principles and Monetary Policy" from J. Alfred Broaddus, Jr., President of the Federal Reserve Bank of Richmond can be found here.

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