NEWS / Foreign Exchange

Nominal Retail Sales Strength in March Lifted Partly by Gasoline Prices

Retail sales rose 0.7% in March after an upwardly-revised gain of 0.5% in February, previously estimated as a 0.1% increase. An early Easter and warm weather are being cited as special factors that may have helped raise retail sales. The major upward revisions from February were in gasoline (+1.5% from +0.8%), nom-store retailers (+5.3% from +2.8%), build materials (-0.2% from -1.4%), and health and personal care (+0.4% from unchanged). In March, auto sales rose 0.4% mainly due to sales of auto parts dealers. Unit auto sales dropped in March. The 3.1% jump in gasoline prices played a role in boosting the headline reading. There were notable gains in sales of general merchandise (+1.1%), apparel (+2.4%), building materials (+1.4%) and furniture (+0.6%). Purchases of electronic appliances (-1.9%) and sales at non-store retailers (-3.3%) dropped in March.

However, on a year-to-year basis, retail sales excluding autos and gasoline show a significant moderation to a 4.1% pace in March, down from a recent peak of a 9.2% gain in May 2006.

Inflation-adjusted consumer spending is expected to have risen at an annual rate of 3.5% in the second quarter after a 4.2% gain in the first quarter. Inflation-adjusted retail sales numbers will be available tomorrow after the Consumer Price Index is published.

Housing Market Index Declines in March

The Housing Market Index (HMI) of the National Association of Home Builders dropped to 33.0 in April from 36.0 in March. Sub-indexes tracking present sales of single-family homes (33.0 vs. 36.0 in March), sales of single-family homes six-months ahead (44.0 vs. 50.0 in March) and the traffic of prospective buyers (27.0 vs. 28.0 in March) fell in April. The housing market recovery is in the future, not here and now as the Fed would have desired. The report on new residential construction will be published on April 17.