Economic activity in March slumped to the softest pace in 31 months, according to this morning’s update of the Chicago Fed National Activity Index. The three-month moving average of this business cycle benchmark (CFNAI-MA3) decreased to -0.27 last month from February’s -0.12 reading. Last month’s estimate is the lowest since Aug. 2012 for the CFNAI-MA3 data and another sign that the macro trend for the US has suffered in this year’s first quarter. Using this index as a guide, economic activity is well below the historical trend (i.e., below zero).
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The unusually wide spread at the outer edges for the trailing performances of the major asset classes via our standard set of ETF proxies has been squeezed a bit. The compression is due mostly to recent weakness in US real estate investment trusts (REITs). Securitized real estate is still in the lead for the trailing one-year period (250 trading days) through Friday (Apr. 17), but the performance advantage has been pared in recent weeks. The Vanguard REIT (VNQ) is ahead by nearly 18% for the past year, but that’s well down from the nearly 30% surge for that trailing period in last month’s update.
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● US leading indicator points to slower growth | Reuters
● US consumer sentiment rises in April | Reuters
● US Consumer Prices Tick Up, in Latest Sign of Emerging Inflation | WSJ
● China’s central bank enters stimulus mode | CNN
● China bank move stokes global worry | Sydney Morning Herald
● Eurozone upturn likely to boost UK economic growth, says new report | Guardian

● Dealing with China: An Insider Unmasks the New Economic Superpower
By Henry M. Paulson
Interview with author on CNBC
Former Treasury Secretary Hank Paulson said Wednesday the growth model powering China’s economy is running out of steam. Paulson, author of the new book “Dealing With China: An Insider Unmasks the New Economic Superpower,” said in an interview on CNBC’s “Squawk Box” that the world’s second-largest economy is too reliant on exports and municipal debt to build infrastructure.
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The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to increase slightly to -0.07 in the March update that’s scheduled for Monday (Apr. 20), based on The Capital Spectator’s median point forecast for several econometric estimates. The projection is incrementally above the -0.08 reading for February, which reflected a a mildly below-average pace of economic growth for the US relative to the historical trend. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s estimate for March as a guide, CFNAI’s three-month average is expected to remain at a rate of growth that’s slightly below the historical trend.
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US economic growth slowed in this year’s first quarter, perhaps to the point that the quarterly change for Q1 GDP will be flat in the Commerce Department’s “advance” estimate that’s scheduled for release on Apr. 29. From a business cycle perspective, however, the recent deceleration is modest so far. Indeed, there’s still a high degree of forward momentum in the macro trend based on the numbers in hand. Yes, the tide has turned, but moderately so and after a period of relatively strong growth.
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● March housing starts in US rise but miss estimates | USA Today
● US jobless claims hit highest level in six weeks | MarketWatch
● Consumer Comfort in US Cools From Highest Level Since 2007 | Bloomberg
● Philly Fed Index Rises More Than Expected In April | RTT
● UK employment jumps, jobless rate lowest since July 2008 | Reuters
● Prices start to rise in euro zone, easing deflation fears | Reuters

Residential housing construction rebounded last month, but by less than expected, the US Census Bureau reports. Econoday.com’s consensus view anticipated a strong gain to 1.04 million units in seasonally adjusted annualized terms for March. The actual number turned out to be substantially lower: 926,000. That’s above February’s revised total of 908,000 starts, but mildly so. No wonder that the annual trend for construction remains flat to negative so far this year.
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As it lays the groundwork for raising interest rates, the Federal Reserve has been squeezing the annual growth rate of the real (inflation-adjusted) supply of so-called high-powered money (aka base money (M0)). But economic growth has turned wobbly lately, including yesterday’s disappointing report on industrial production for March. The slowdown bias overall is expected to pare US GDP growth in this year’s first quarter to a virtual standstill, according to the Atlanta Fed’s current projection. Given the current climate, it’s no surprise to learn that the year-over-year change for the real monetary base ticked higher in March after decelerating sharply for more than a year.
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● Mining, utilities sink US industrial production in March | Reuters
● New York Manufacturing Activity Unexpectedly Contracts In April | RTT
● Survey Indicates Builder Confidence on the Rise in April | MReport
● US Mortgage Applications Fall After Consecutive Gains | ON
● Inflation Expected at 1.7% In Year Ahead via Atlanta Fed Survey | Atlanta Fed
● Fed beige book: US Economy still growing but slowly | USA Today