US housing starts rebounded in February, but newly issued building permits — a leading indicator for residential construction — eased for a second month and fell 6.8% vs. the year-ago level. “January’s dramatic drop in housing starts, largely driven by exceptionally cold weather, reversed in February, but a decline in housing permits tempered the optimism. Looming tariffs are creating considerable uncertainty about construction costs, limiting activity,” advises Bloomberg Economics.
US industrial production rose more than expected in February, boosted by a surge in motor vehicle output. Factory output jumped 0.9% last month, well above expectations, but tariffs are casting a shadow on the outlook.
US import prices picked up in Feburary, rising 2.0% vs. the year-ago level, up from January’s 1.9% increase. Higher costs were reported for consumer goods, which implies a hotter inflation outlook.
The Fed is expected to leave interest rates unchanged in today’s policy announcement, but the key event will be the release of the central bank’s revised economic projections. “They are facing the most difficult challenge a central bank ever faces when the shock is both pushing up prices, in terms of imports, and reducing jobs, in terms of input costs,” former Treasury Secretary Larry Summers wrote on Tuesday. “This is what tariffs do.”
Foreign stocks have been outperforming US equities by a substantial degree year to date, partly due to a weakening US dollar, notes TMC Research, a unit of The Milwaukee Company, a wealth manager. “It’s not a perfect relationship by any means, nor is it the only one for evaluating the outlook for US vs. foreign shares. But the forex factor can be a powerful tailwind, or headwind, depending on which way the wind is blowing in currency markets. Monitoring the dollar’s trend, in other words, is a crucial part of managing a global portfolio’s asset allocation. At the moment, the wind is blowing in favor of foreign currencies, which in turn is partially helping stock markets outside the US outperform their American counterparts by a wide margin.”
