Raising the bar even further

Summary

U.S. Review:

• This week's lighter economic calendar allowed forecasters more time to assess the implications from the prior week's blowout retail sales report. We have revised our forecast for Q1 growth up to a 5.5% pace from 4.8% previously, and growth for the year is now pegged at 6.5%, up from 6.4%.
• Sales of existing homes fell 3.7% in March, but realtors are selling homes faster than ever and often well above the asking price. Inventories of homes remain near a record low, and the median price of an existing home surged 17.2% over the past year.
• Initial unemployment claims fell more than expected during the latest week, dropping to 547,000 claims—the lowest level since the pandemic began. The four-week moving average for the April survey week was 651,000, down from 751,750 from the March survey week, setting the stage for another strong employment report.
• New home sales surged 20.7% in March, and sales for February were revised significantly higher. Builders report exceptionally strong demand and are selling homes faster than they can build them.

International Review: Bank of Canada Tightens Modestly, European Central Bank Stands Pat

• The Bank of Canada took an initial step toward removing monetary policy accommodation, while the European Central Bank kept all of its current accommodation in place.
• There are some small signs of green shoots in Europe, as the manufacturing PMI for April remained high and the services PMI rose back above 50 for the first time since August.

Interest Rate Watch: Looking for “Substantial” Clues

• Next week's FOMC meeting is not expected to bring any major policy changes. We expect Chair Powell, however, to be pressed on what might constitute “substantial further progress” on the Fed's employment and price stability goals in his press conference, as the timing around tapering asset purchases comes under more focus.

Topic of the Week: A Quicker Rebound

• Our best read suggests that first quarter consumer and business spending figures will now come in stronger than we had penciled in for our April 7 forecast update.

Download the full report