Week of April 21
A Mixed Bag
The data this week continued with recent trends of showing no actual discernible trend in how consumers and business are reacting to the tariffs – or more importantly the uncertainty over tariff policy.
New home sales (a great measure of long-term consumer confidence) were solid and new orders for nondefense capital goods were OK. This seems to fly in the face of the Conference Board’s leading indicator and the University of Michigan consumer sentiment measure – both of which are flashing warning signals.
So, what to believe? Good question, and I’ll stick with what I said last week. Businesses and consumers are nervous – very nervous – but they have not let that impact their behavior. They seem to be waiting for another shoe to drop. This makes every data read all the more important.
Important Data Points From The Past Week
Conference Board Leading Economic Index
The Conference Board’s Leading Economic Index fell in March as tariffs led to a high degree of economic uncertainty. Driving the Index lower was a decline in consumer expectations, falling stock prices, and weak new manufacturing orders. The Index, which has been tilting lower over the last several months, is suggesting softening economic activity, but not yet a recession. This supports my GDP forecast of 1.2% growth for 2025; a growth rate that is well below the U.S.’ potential growth rate.
Canadian industrial prices rose 0.5% from February to March and now stands 4.7% higher than one year ago. Industrial price inflation has been slowly decelerating over the last two months.
Energy and petroleum prices were the main factors behind the deceleration. Core prices (excluding energy) accelerated slightly in March, indicating that inflation remains an issue outside of the volatile energy sector. The Bank of Canada held pat on interest rates last week and is likely to continue to do so until it has a clearer sightline on the impact of tariffs on the Canadian economy.
U.S. New Single Family Home Sales
March was another solid month for new single family home sales as they rose 7.4% from February to a seasonally adjusted annual rate of 724K. Much of this gain was made in the South and Midwest regions, while sales were essentially flat in the West and down in the Northeast.
March’s data continues to bolster my forecast that sales will slowly climb from here on out, ending the year 6% higher than in 2024. Of course, the risks remain heavily weighted to the downside due to tariffs, labor availability, and high mortgage rates. One downside scenario would have homes sales growing closer to 3% for the year. Regardless, at present, potential homebuyers remain reasonably positive and once excess new inventory gets reduced, we could see stronger than expected home construction in the second half of the year.
Canadian Industrial Price Index
U.S. Advance Durable Goods Orders
New orders for nondefense capital goods, excluding aircraft, rose in March – climbing 0.1% from the previous month. New orders appear to be losing some momentum following a run-up in activity, likely due to the fear of impending tariffs.
The detailed orders data is lagged one month (so it’s February data), but it showed that in February construction-related product orders remained solid. This too is likely to weaken as the pre-ordering impact wears off and faces the reality that construction activity is slowing.
Canadian Retail Sales
Canadian retail sales fell in February, dropping 0.4% from January. Much of that was due to auto sales, and there was strength in food sales and general merchandise. I think the importance of this data is marginal at best since the tariffs began in March. We’ll get a better read on Canadian consumers health in the weeks to come.
What I’ll Be Watching This Week
Lots of important data this week. The all-important jobs data for the U.S. comes out Friday and the number of private sector jobs added (or not) will be watched closely. Also slated for release is construction spending, inflation data, and another read on consumer confidence.
What I Watched Last Week
This is a great thriller set in a city-like underground bunker after a global catastrophe. The President has been murdered, and a secret service agent is being framed.
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