Strong Housing Starts in January, Builder Confidence High

Signaling optimism for the economy, housing starts were unexpectedly strong in January.

Building permits led the way, suggesting future growth. Permits rose across the majority of the country, falling only in the West, a vital sign that builder confidence is up.

Housing starts were solid, exceeding expectations despite a 2.6% decline to a 1.246 mln unit rate from December’s estimate of a 1.279 mln unit rate. Building permits are up also, rising 4.6% to a 1.285 mln unit rate from a December rate of 1.228 mln.

Both single family and multifamily home sales have been steadily rising since 2011 and both categories should continue to improve pending a major shock to the market.

“The job market is improving and wages are going up,” said Bernard Baumohl, Chief Global Economist at The Economic Outlook Group, pointing to signs that futures may start to climb. “Mortgage rates are rising but they are still historically low.  Young adults are moving out of their parents’ basements who finally feel more secure about their jobs.”

But builders still face residual challenges from the Great Recession – a lack of skilled workers, shortages of available land and regulatory restrictions – and the uncertain currents running through Washington right now may be reason for concern.

So far, President Trump and his administration have promised to reduce regulation and create jobs, giving the market confidence, but these promises will soon be put to the test by expectations of real results. If it turns out the legal and political maelstrom that’s been released on the US results in more chaos than anticipated, the housing market could be negatively affected as early as the spring or summer.

“Anytime you see surges in building permits, long-term change for recovery is under way,” said Michela Zonta, Senior Policy Analyst for the Housing and Consumer Finance Policy at the Center for American Progress, a liberal think tank based in Washington, D.C.

Recovery will be determined in part by how the Department of Housing and Urban Development responds to homebuyer needs. While policy makers had previously been pushing for actions like lowering market insurance rates for Fair Housing Act loans, the HUD chose not to enact the latest proposed FHA fee cut, testing whether solid housing starts will mean much if the initiatives designed to benefit people who really need them do not actually help them.

“So on one side you have signs of a recovery, we’re building homes, but who are those houses for if people can’t afford to buy them?” Zonta said. Financial deregulation and a return to predatory lending could cool the market.

But there is confidence that the housing sector will continue to grow with the financial sector long-term, and, for now, little worry about another recession. Despite the uncertainties created by President Trump, market conditions are favorable. The general consensus is that things are much healthier and builder and consumer confidence will remain high.

“Credit standards are pretty fair right now, and the administration has expressed an interested in making credit available,” said Andrew Sorogen, Economy Reporter at U.S. News & World Report. “Mortgage rates can be as low as rent payments right now, but it’s hard to see trends unless you’re looking further out, maybe a year or two from now.”





Retail sales exceed expectations in January; auto sales slow down.

Consumers increased spending in January in a sign that they are confident about the economy. The rise in retail sales reflects this winter’s employment growth and President Trump’s promises to cut taxes.

Retail sales increased by 0.4 percent in January, beating experts’ expectations. January’s retail sales report is led by spending gains on hobbies, electronics and restaurants, after December’s slowdown in spending on entertainment.

The strong data on retail sales was released the same day that consumer prices, which made their biggest gain in four years. Employment figures don’t give consumers a reason to worry. With 246,000 jobs added in January, consumers seem to be not in a rush to save. The uptick in demand lifted retail sales by 5.6 percent compared to January 2016.

Retail sales did better than predicted by experts from NOMURA, the Japanese financial service company. Sales exceeded their forecast by 0.1 percent.  January’s retail sales report is led by spending gains of 1.8 percent on hobbies, 1.6 percent on electronics and 1.4 percent on restaurants, after December’s slowdown in spending on entertainment.

While consumer confidence is spiking and Americans appear to feel good about the overall economy, their optimism is not supported by a rise in incomes and can last only so long, says Lindsey M. Piegza, chief economist at Stifel, brokerage and investment banking firm.

“I think this confidence can carry retail sales for one, maybe three more months, ”said Piegza.

Trump’s promise to cut taxes supports consumers’ confidence.

“I think consumers are very excited that taxes might be reduced, that corporate tax rates might be reduced,” sais Piegza.

Piegza said that cutting taxes might be a challenge for Trump’s administration.

“We haven’t seen any of it going on, and I think it will be a difficult trial for Trump’s administration to push this agenda,” she said.

Large sales of discretionary goods could be a sign of consumers’ confidence in Trump’s economy, but some experts attribute January gains in sales to nothing, but a weak spending in prior holiday months.

Sales of electronics, clothing and merchandise are just bouncing back from weak sales in previous months, says Louis Crandall, chief economist at Wrightson ICAP LLC, a research firm.

“Those categories were weak in November and December,”  said Crandall.

“Large sales in January are just rebounds from weak performance during the holiday season in all of these categories.”

After increases in sales for seven consecutive years, auto sales showed a noticeable slowdown this month, with sales falling by 1.4 percent in January.

“There is a lot of discounting in automobiles,” said Peter Morici, a professor of business at the University of Maryland.

Morici predicted car sales would drop by 0.2 percent this month, but he attributed this plunge to the decrease in car value.

“If you have lower prices but sell the same amount of goods,” he said, “your sales go down.”

Relatively warm January was unlikely to blame for more spending on gas. A large increase in gasoline prices drove sales at service stations up 2.3 percent in January.

Average hourly wages didn’t meet expectations and gained only 0.1 percent in January. Despite a sluggish increase in earnings consumers drove non-auto retail sales up 0.8 percent.

“The consumer isn’t necessarily seeing more cash, but the feeling is there,” said Piegza.


Suburban Small Businesses Fear The Minimum Wage Hike

By: Jade R. Gardener

All Emily Siegel has left to remember the Larchmont of her childhood are memories and photos. Today remnants of stores such as Toy and Sports, Wendy Gee’s and almost a dozen more community staples are now ghosts. Since the financial crisis the number of small businesses in Larchmont, NY has decreased drastically. Very few new businesses have taken their place, leaving many empty storefronts.  “Stores that we would go to for most our lives are just gone. Every time a business closes it steals the spirit of the town,” said Siegel.

The town of Larchmont, once celebrated as the 11th best place to live in the country heavily because of its plethora of small businesses, is town is now struggling to keep these small businesses alive. Since 2009, Larchmont has seen a 40% decline in small businesses.

The death of Larchmont’s small businesses is due to a number of factors and the impending minimum wage increase is anticipated to lead to the increased decline of businesses on the already edge of collapse. The loss of small businesses is not just a worry for Larchmont but all small businesses in the suburbs of New York City.

The population of the suburbs that surround the New York City is roughly 1.5 million residents. Each town is dealing with the impending increase in different ways. For many retailers, the rising minimum wage is an added burden to their already overflowing list of economic strains. Over the next six years, minimum wage workers in New York state prepare to see an increase in their income. For the lowest waged workers, this is a victory. For small business owners especially in the suburbs on the outskirts of New York state, it is a loss.

“In these small towns, we are fighting a number of issues. There are exorbitant rents for small businesses and the internet is making the need for a retail store unnecessary,” said Bob Marrone member of the Larchmont Chamber of Commerce.

In most recent times Larchmont has seen the closing or retailer Wendy Gees after 24 years in business. This loss has many patrons of the store worried about what is next. Siegel worries what the increase will do to other businesses, “I see large and small retailers struggling. Many of them are closing earlier and there is less staff. If they all have to pay more for minimum wage employees, I am afraid to see what town looks like by 2021.”

Although the suburbs played no part in the Governor’s approval of the minimum wage they have to carry it out.  As seen in chart New York City Minimum Wage  Suburbs vs. The City, the city and the suburbs will both get to the minimum wage of $15 an hour by 2021, but the suburbs will move at a slower and less gradual pace.

NYC vs. NY Suburbs Minimum Wage
NYC vs. NY Suburbs
Minimum Wage


While the city minimum wage will increase by two dollars every year until reaching fifteen in 2018 the suburbs have decided on a more steady one-dollar a year increase. The issue here is while those in the boroughs will start making fifteen dollars by 2018 those in the towns and villages on the outskirts of the city must wait until 2021.  Residents such as Siegel hope that the slower increase allows small businesses to get their footing and map how to afford the increase.

Workers in the suburbs say they need the increases terribly.  As many complain minimum wage workers in the city are not subject to the expenses required for working in the suburbs. Small businesses such as the Cherry Tree Frozen Yogurt shop in Mamaroneck, NY already pay some of their employees above the present minimum wage.

Jessica Mendoza who started Cherry Tree Frozen Yogurt  three years ago start making about $8.75 and hour and now makes already makes $12 (although the increase to $12 for suburbians will be in 2019). Mendoza sees the higher present wage as a positive,  “You have to drive everywhere here so living here is more expensive. Now that I am making more I have more for books and to save.”

Some workers, however, hope that the increase actually leads to increased wages for those making above the minimum wage. Some workers, however, believe that the increase in the minimum wage will lead to a boost for those already making more than minimum wage.

“If those making minimum wage get an increase then that means if you are making more than the minimum wage already you should see an increase too,” said Elena Espinal of the Fair Deal Cafe in Yonkers, NY.

Even though the minimum wage seems promising to workers it is a potential nightmare for business owners, who are dreading the increase in their costs.

In Mount Vernon, NY small businesses owners are dreading the increase as well. “I try to keep my prices low for the consumer. If I have to pay my workers more, I can’t give raises,” said Meisha Jones owner of Cupcake Cutie Boutique.


Although workers are optimistic the truth is owners are faced with a dilemma, pay wages or close. “ I have talked to some small business owners that are weighing their options. Some will raise costs. Others will fire workers or cut hours, some will pay off the books and other will close,” said Jones.

Politicians, on the other hand, say the increase in wages will help small shops by increasing spending. Officials, however, hope that the increases in wages will lead to an increase in spending from consumers.

The increase is a positive one says, Mount Vernon city council president, Marcus Griffith.

“We want to see more small businesses growing in the community and if people make more, the hope is that they will spend more too, thus allowing businesses to cover the increase”, said Griffith.

The problem, however, will occur if a business can not cover the increase. Small businesses are risky and time-consuming. The budgets and salaries are directly dependent on consumer spending. With consumer spending still not back to their pre-recession levels the increased the minimum wage is an added strain that threatens the success small businesses throughout the suburbs of New York.

The Economic Fallout of Sports Authority

Sports Authority_1

American retail is in the midst of a paradigm shift. Amid a retail climate that is increasingly dominated by online sales, brick and mortar chains are being forced out of arenas that they once dominated.

Ten years ago, Sports Authority, which operates 466 stores across the United States, was the nation’s largest sporting goods retailer. Yesterday, it announced it would close all of its stores. Aérospostale, a casual clothing and accessories brand, Scoop, a high-end boutique chain, and Quicksilver, a surfwear retailer have each recently filed for bankruptcy and face similar fates.

The demise of bricks and mortar retailing could spell trouble for many, including the thousands of workers Sports Authority currently employs who now face uncertain futures. Many of the 29-year-old company’s 15,001 employees are expected to hit the jobs market. The timing is inopportune.

A sales associate at Sports Authority’s Denver location, who didn’t feel comfortable giving her name, said she has already begun looking for another job. “I am really willing to do pretty much whatever,” she said. Word is the location will be closing sometime in June. “I honestly don’t know what I’ll do,” she said.

Sports Authority is one of the latest national retailers to fall prey to mega “e-tailers” such as Amazon, that increasingly draw consumers, lured by convenience and endless selection across myriad categories, off the streets and onto the screen.


A search for “Wilson tennis racquet” yields almost 2,000 results. 

In 1999, e-commerce accounted for just 0.6 percent of all retail sales. Last year, it made up 7.5 percent of total retail sales, according to seasonally adjusted economic data from the Federal Reserve. April’s retail sales report, released last Friday, showed remarkable gains in online sales – they jumped 2.1 percent.

Some soon to be former Sports Authority employees will find work with its competitors – Modell’s, Dick’s, Cabela’s, Bass Pro Shops – or at other retailers, but some will have to pivot toward other industries. “Obviously not all of them are going to be able to find jobs in retail,” said Thomas Simons, an economist at Jefferies. “They are going to need to find new skills.” Simons noted that many retail workers are younger, and can more easily be retrained to find different types of jobs than older workers.

Domisah Purnell, a cashier for Sports Authority in Brooklyn, doesn’t know when the store will close, or what she’ll do next. “I am starting to look for other things. I will most likely look to work as a cashier because I have the most experience in that.” She has no work experience outside of the retail industry, but is confident she’ll be able to find another similar job.

Salespeople at other bankrupt national retailers including Aéropostale, are too unsure of what they’ll do next. Jeffrey, who for privacy purposes declined to give his last name, expects that within six weeks he’ll be out of a job at the casual apparel company’s Times Square location. “I’ll either file for unemployment because I’ll be laid off or I’ll see if my stepdad can get me a job at Sheraton Hotels, where he works. But that’s a back up plan. If I don’t find anything else, I’ll just go there,” he said.

Although today’s jobs market is relatively strong, the retail industry shed jobs last month, and will likely to continue contracting. By the end of 2016, retail layoffs are expected to be at their highest level since 2010.

Dollar stores are thriving – Dollar General plans to open about 2,000 new stores by 2017, to operate more than 14,000 total stores. But dollar stores are unlikely to offer wages that are above or even match wages at Sports Authority. Despite gradual wage growth – overall wages rose 0.3 percent in April – more job seekers and fewer job openings in the retail arena will put downward pressure on wages, Brown said.

“A lot of these chains are closing right now, and the bad news is that you are probably an under skilled worker, and that’s why you’re working in retail. You’re going to have a hard time finding another opportunity in retail,” said Garrick Brown, Vice President of Retail Research at Cushman & Wakefield.

There’s a potential silver lining, though. Some retail workers might be able transition into office work, for which they could earn more than in retail. “If you get into more professional services the wages are higher and benefits are better.”

The prospects for the real estate occupied by liquidating or downsizing retailers is also uncertain. Sports Authority’s 466 stores range in size from 8,000 to 80,000 square feet, and could eventually be developed into other property types. If the trend away from big-box retail continues, their leasing agents will have trouble finding new tenants.2016-05-26 16.36.37 HDR

“I think rents will probably drop and I think some very large retailer properties are going to need to be repurposed at some point over the years. I think there are going to fewer and fewer of those properties that will make economic sense to run at that size,” said Jefferies economist Thomas Simons.

Sports Authority’s competitors could take over existing stores, and enter new geographic markets. Some spaces could be transferred to grocers, which often occupy spaces that are between 30,000 and 40,000 square feet. “A fair number of retailers are this size box,” said retail expert Joseph Feldman.

Feldman said that the brick and mortar retail model should be adjusted, but that it won’t ever be slaughtered by e-commerce. “If you live in a place like Columbus, Ohio and everyone on the block wants something delivered at a different time, it’s very expensive. I understand why it’s attractive to the consumer, but the consumer is going to pay for that ultimately. There’s a reason why for three millennia there have been markets and bazaars that people go to and buy stuff.”

“Chances are they’ll be filled with something,” Larry Perkins, CEO of SierraConstellation Partners, an advisor to middle market companies in transition, said of the vacancies. “But it may not be fast.”

Nick Rossollilo, president of Concinnity Financial, sees evidence of a longer-term trend in Sports Authority’s shuttering. “I think someone will move in on the Sports Authority assets in some of the locations but I do think some of them will close up and just stay vacant.”

“It’s probably a scary time to be an investor or owner of commercial real estate,” he said.

Can automation be the death knell for minimum wages and human jobs?

By Harini Chakrapani

bktouseBrent Kirkpatrick taking electronic food orders on the Amazon tablet at Creperie, Macdougal Street, Greenwich Village, New York City. Photo by Harini Chakrapani

Brent Kirkpatrick cheers New York’s decision to phase in a $15 minimum wage increase.

“I have been underpaid for majority of my restaurant life. It is fair to take into account what the cost of labor is,” said Brent, 45, who makes crepes at Creperie, a restaurant in Greenwich Village, New York.

But now, as a proponent of the minimum wage increase he is in awe of technology that made the delivery guy’s job redundant.

“The delivery guy was getting paid by the hour and would sit here without any deliveries. That’s six to nine hours without working, not worth it for the employers and employees,” said Brent.

Creperie availed the services of online food delivery providers Caviar. Caviar has its own delivery team and is connected to Creperie’s orders via a tablet application. When a customer places an order, Caviar picks up the order from Creperie and delivers directly to the customer for a flat fee.

“Technology is less likely to make the type of errors humans make while taking an order. Mobile/ tablet applications are an organized, efficient and accurate way of handling deliveries as opposed to a person answering the phone. The interface is better,” said Brent.

From small dessert joints such as Creperie to large chains such as Panera Bread, Chili’s and Applebee’s that have automated their food ordering and payment services with touchscreen tablets, technology is making in-roads into the restaurant industry. Now, worries are mounting that technology could take away human jobs.

The argument is simple enough: how can restaurant owners continue to enjoy their profits while meeting the increase in labor costs?

“The prices of products will go up. There will be more pressure on restaurants to limit employment,” said economist Harry Holzer, professor of public policy at Georgetown University.

According to Albany, New York based non-partisan think tank Empire Center the labor costs are high. In a study published in November, it concluded how the $15 an hour wage increase could threaten the economic well-being of 3.1 million workers by eliminating 432,500 jobs.

“One of the ironies here is that it is the big corporations like McDonald’s that will have the easiest time automating their services. People that will be hit the hardest with these wage increases will be the mom and pop restaurants that won’t have the capital to do it or the ability to do it on scale,” said Ken Girardin, policy analyst at the Empire center.

Two years ago, Chili’s embraced automation by allowing customers to order and pay their bills using using the 7-inch android tablets sitting atop their tables instead of paper menus.

Texas based startup Ziosk that developed the technology for Chili’s tablets had only wanted to solve a basic problem with restaurants while offering its product.

“On a Friday or Saturday night, restaurants can get very busy, even if they have a large number of staff, to serve all the customers. A lot of people want to pay and leave around the same time, and they just can’t,” said John Regal, chief strategy and product officer of Ziosk.

Ziosk’s tablets feature an in-built printer, a 22-hour long lasting battery, a camera and an interface with food pictures and games.

Its business model is attractive. It doesn’t bill restaurants for the cost of the tablets or installation. Instead, it charges a subscription fee for its service which includes games.

Ziosk has been successful, deploying about 65,000 tablets in more than 1,250 restaurants in all 50 states.

With food ordering and payment being automated, the threat to a server’s job seems real. But, John Regal insists Ziosk is only a server assistant, helping servers during peak times.

“When you order a burger there are a lot of questions to be answered: how do you want your burger cooked, do you want cheese on it, if you have any dietary restrictions. In these cases, a server can be faster than technology in trying to figure out the right order,” said John.

Companies like Domino’s and Panera Bread have expanded their scope with technology.

Panera Bread lets customers order food online from their office, car, work or home up to five days in advance and pick up at a scheduled time without waiting in line.

Domino’s Australia wants to replace delivery drivers with its four wheeled bots called the Domino’s Robotic Unit (DRU).

It doesn’t stop there. With every passing day, technology is getting smarter, expanding its electronic presence into areas that have been accessible only to humans.

Makr Shakr, an Italian based company co-founded by engineer Carlo Ratti, professor at the Massachusetts Institute of Technology introduced its robot bartenders in 2013.

Makr Shakr’s robot arms programmed to mix cocktails have caused quite a stir within the robotics community.

According to a spokesperson, the company today serves Royal Caribbean cruise ships and is set to promote a portable version of its bar system.

Others remained skeptical about how far robots could go in displacing human hands from the bar or kitchen.

“People can do jobs that are far more complex than a robot. Robots can be useful in doing some simple delivery tasks that can be automated. They can’t replace a person, but free up the time of a person so that they can do the more high value part of the job, which is face to face customer service,” said Andra Keay, Managing Director of Silicon Valley Robotics, a non profit San Francisco based industry group, that supports innovation and commercialization of robotics technology.

But according to economist Harry Holzer, who previously served as chief economist of the Department of Labor restaurants, in particular fast food chains seemed conducive to robotics automation.

“The easiest jobs to automate are the ones that involve very routine, repetitive, activities. Fast food is very routinized. There are only so many ways you can make a big mac—spread the sauce on the bun, cut up the lettuce and tomatoes,” explained Harry.

Whether or not robots become the cause for human unemployment remains to be seen. But for now, it seems clear that restaurants are in a rush to automate as a response to the increase in minimum wages.


Manufacturing Lost Millions of Jobs, But How Did It Get There?

By Kathryn Casteel

Developed countries all over the world have transitioned away from production and manufacturing for decades. The U.S. in particular shed over 5 million jobs in the manufacturing sector since the turn of the century as a result of various trade policies and advancement in technology.

The nostalgia of a once thriving industry haunts present day policy makers. Presidential candidates, both Democrat and Republican, have announced plans and promises to bring manufacturing jobs back to American soil.

Some economists and policy experts argue the investment in manufacturing isn’t worth the effort, while others praise it.

But what exactly contributed to the decline in the U.S. get here and what are the options going forward?

Click here to see the rest of the interactive timeline. 
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A diversified economy in Dallas keeps Texas going amid low oil prices

Unemployment in Dallas Houston 2008 - Present

The other side of the apartment complex was still being built when Helen Hill moved into her new studio apartment in Dallas. It was an easy choice for the 29-year-old Dallas-native to move back to her hometown after two years of living in China. “It’s a cool city and the quality of living is really good,” Hill said.

A decline in oil prices didn’t hurt oil-dependent Texas as one might expect. Houston has suffered job loss in the mining and logging sector since 2014 but Dallas, on the other hand, is thriving.

Continue reading A diversified economy in Dallas keeps Texas going amid low oil prices

Five Things to Watch on the U.S. International Trade Report

U.S. international trade had a disappointing first quarter. The gross domestic product grew slightly by 0.5 percent on an annualized pace, according to a report released last week by the Commerce Department. This is the slowest pace in the past two years. The U.S. economy is still suffering the effects of a strong dollar and a weak global economy, which makes American goods more expensive to the world at large. The U.S. International Trade report for March will likely reflect the nation’s modest growth. Here are five things to watch in tomorrow’s report released by the Department of Commerce.

  1. A decline in exports

Economists surveyed by Bloomberg predict a $41.3 billion trade deficit for the month of March, a narrowing of $5.8 billion. This is welcoming news since the gap widened to a six-month high of $47.1 billion in February.

Continue reading Five Things to Watch on the U.S. International Trade Report

Five Things to Watch for April’s Auto Sales Report

Kathryn Casteel

American auto manufacturers release their April sales numbers tomorrow morning. Industry analysts, such as and Kelley Blue Book, are expecting total vehicle sales for last month to hit around 1.52 million. Here are five things to watch as the reports are released.

  1. Will April’s numbers meet expectations?

Analysts predict that April’s seasonally adjusted annual rate for vehicles will hit around 17.5 million for the month, up from March’s rate of 16.4 million. The month of March wound up disappointing for analysts that expected a rate around the mid-17 million range. Economists say one month’s data doesn’t necessarily make a trend.

“We believe an early Easter holiday likely depressed vehicle sales in March, therefore they should bounce back in April,” said Ryan Sweet, senior economist at Moody’s analytics.

However, a second month of missed expectations could signal that auto sales are finally leveling out after record breaking numbers last year.

2. Is growth in truck and SUV sales slowing down?

Surges in SUV and truck sales were highlights for auto manufacturers for the past several months.

Low oil prices played a major factor in sales growth over 20 percent for compact SUVs and crossover vehicles in both February and March. Analysts predict April SUV and truck sales will be up 5 percent from last year, much lower than the past two months.

The national average price for gasoline has increased to around $2.14 per gallon. This number may be lower than during the recession period, but rising gas prices could make consumers a little more hesitant to purchase larger cars and trucks than they were a few months ago.

3. What is going on with America’s “Big Three” manufacturers?

Analysts forecast that General Motors will be down 2.3 percent in sales growth from last year, after reporting less than one percent growth the month before. Ford Motor Company and Fiat Chrysler expect to report sales growth around 5 percent. These manufacturers reported much stronger growth earlier this year.

However, foreign manufacturers, such as Nissan and Honda, are expecting another strong month in sales for April.

Jeremy Acevedo, industry analyst at says American manufacturers saw most of their growth in SUV and truck sales for the first part of the year.

“They’re not seeing the same amount of growth there,” said Acevedo.

Now that SUV and truck sales are starting to cool, so are overall sales for America’s biggest auto manufacturers.

4. What would a strong report mean about U.S. consumers?

A cut back in vehicle purchases made a significant impact in overall retail sales in March. The Commerce Department reported a 0.3 percent decline in retail sales for the month. However, excluding auto sales, sales were up 0.2 percent.

Total retail sales have been flat for the first few months of the year and consumer spending is the main driver of the American economy.

“Retail sales have been soft, but the lack of pricing is a significant issue,” said Sweet.

Big ticket price items that can be seasonally affected, like autos, can hurt the overall the retail sales report. But a strong rebound in auto purchases could lead to a more attractive retail sales report later this month.

5. Will Volkswagen ever recover?

Volkswagen AG is expected to see another month in the negative with a 2.3 percent decline in vehicle sales from April of last year. Volkswagen has immensely suffered from an emissions cheating scandal discovered September of last year. This month the automaker reported a net loss of $1.77 billion for 2015.

“They haven’t been really fast in throwing out any accommodations or resolutions for owners out there,” said Acevedo. “That’s really part of the problem.”

Acevedo said, like most manufacturers in the face of a crisis, it will be a long road to recovery for Volkswagen.

Five Things to Watch in March’s Durable Goods Report

By Yuxin Gao

The U.S. Department of Commerce will publish its first look at this month’s manufacturing sector performance at 8:30 a.m. on Tuesday this week. Economists expect long-lasting goods orders, a main indicator for U.S. manufacturing and business expansion activities, expands at a 1.9% rate, according to 76 economists’ median estimation for Bloomberg.

1. March was an important month

In January and February, factors like abnormal winter weather, early Chinese Lunar New Year complicated durable goods numbers. As the holidays ended and spring came, March’s durable goods new orders will start to show the real demand for U.S. manufacturing businesses.

“There is nothing we can point to and say things are better or worse because of some other factors, ” said Andrew Zatlin, founder of SouthBay Research advisory firm. “This is going to be a pure trend line. ” 

New orders for durable goods has gone down in three of the last four months, which made economists worry that the manufacturing  industry would shrink. Economists have been waiting for March’s report because it will give a hint of what the rest of the year will look like. 

2. Manufacturers postpone investment plans

Regional factory sector surveys showed businesses are holding on to their cash and are delaying capital projects. “We kind of anticipated it’s going to be a relatively soft quarter for capital spending,” said Scott Brown, chief economist at Raymond James financial service. A lot of business are waiting for further signs to tell them the next move. They have the cash to invest, but they have not received new orders yet.

Stagnated investment was led by the weak global economy, including Brazil’s financial crisis, European stagnancy, and China’s slowdown. In February,new orders for durable goods decreased a seasonally adjusted 3.1%, a sharp reversal from January’s 4.3% growth. This kind of back-and-forth has lasted for more than a year.

3. Larger and faster job losses

In March, manufacturing industries lost 29,000 jobs. Durable goods industries accounted for 24,000 of them. The job loss was mainly reported in machinery, computer and electronic products, and primary metals industries. Since reaching an employment peak in March 2015, durable goods manufacturers have cut a total of 68,000 jobs.

4. A weaker dollar may benefit exports

After getting stronger for nearly three years, the U.S. dollar began to weaken in mid-January. This improved  American  exports to its main trading partners –Canada and Mexico because the value of U.S. dollar decreased as compared to Mexican peso and Canadian dollar.

5 Oil prices decline can boost machinery orders

Oil prices hit bottom in February with the average price of $30 per barrel. In March the price rose to average $37-38 per barrel. Now it is close to $40, according to crude oil prices West Texas Index.

Oil-related manufacturers have been struggling for quite a while. Drilling investment has declined. But with the higher oil prices we might see some increase in machinery orders and fabricated metals orders in March’s report.


Measuring the Economy