March hours worked ticked up, however, so even with average hourly earnings sluggish, it looks like personal income rose +0.2%. Our bottom line is that we will have more "muddle through" growth data as we move through 2013 - which is not enough to move the Fed away from its easy course.
Consumer confidence is driven by 2 factors – 1) an assessment of the current situation, and 2) consumer expectations. With the unemployment rate coming down, consumers’ assessment of their current situation is improving. Expectations can prove more fickle, but seeing headlines such as CNBC’s “Dow Posts Another Record High, Logs First 9-day Win Streak Since 1996” are helping. U.S. retail sales up 1.1% month/month in February and 0.4% ex-autos-and-gasoline are consistent with this story, as are initial jobless claims falling last month.
In the absence of a rising tide to lift all boats (U.S. real Gross Domestic Product in the fourth quarter was revised up, but to only 0.1% quarter/quarter at an annual rate - i.e., still basically flat), economic improvements have come in fits and starts. Despite a muddle-through economic forecast for 2013, some sectors of the economy are likely to exhibit stronger growth as they "catch-up." That is, we're seeing a classic "pent-up demand" story developing, especially in capital expenditures (capex) and housing.
Resolution of the fiscal cliff and a three month extension of the debt ceiling have removed the two major macro policy headwinds from the agenda. However, we are now moving into a period of budget trench warfare as a number of fiscal catalysts arrive. First up is the automatic cuts from the spending sequester. These cuts hit March 1st and...