Recent economic data have been somewhat disappointing. Severe winter weather across many parts of the US last month (particularly the massive storm in Texas), has been at least partially to blame for some of the weakness. The Industrial Production report for February was much weaker than expected, as the Texas power shutdown had a significant impact on manufacturing production in the month. We suspect weather also contributed to the unexpected decline in durable goods orders in February. Severe weather was likely a hindrance to consumer spending last month as well. The February retail sales report showed a larger than expected decline across a broad range of categories. We believe the timing of federal stimulus was also a factor in the February retail sales decline, with many households receiving direct payments in early January and then again in March. Meanwhile, rising mortgage rates seem to be letting some of the steam out of the housing market. According to a Freddie Mac US mortgage market survey, US 30-year fixed home mortgage rates have increased about 50 basis points from their bottom in early January 2021, to about 3.17%. However, this remains lower than the average 30-year fixed mortgage rate at this time last year of 3.50%. Existing home sales declined 6.6% in February and new home sales fell 18.2% in the month. We believe tight inventory and firm pricing has also been a headwind for home sales in recent months. Overall, while much of the recent economic data have surprised to the downside, we believe some of the factors are temporary and we believe the underlying trajectory of the economy remains quite favorable.

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