Economic Week in Review

ECRI Weekly Leading Index 134.20 +.45%

Sales at U.S. retailers rose .6% in February, meeting expectations, as consumers took advantage of higher tax refunds and better weather to buy automobiles and shop at department stores. The average tax refund Americans have received so far his year is $2,182, up 4.4% from this time last year. Consumer spending is now projected to increase 3.6% this quarter and 3.9% in the 2nd quarter. "January and February were probably our best months that we've had in, I think, forever, but definitely in years," said Sandy Beall, the CEO of Ruby Tuesday said.

The number of Americans filing initial unemployment claims fell last week to 341,000, approaching a 3-year low. Applications decreased from 347,000 the week before. First-time applications reached 339,000 in the week ended Jan. 23, matching the last week of December as the fewest since January 2001. The U.S. economy is showing "increasing signals of recovery that should boost job growth soon," Federal Reserve Chairman Alan Greenspan said. He also said, "We have reason to be confident that new jobs will replace old ones as they always have." He warned against protectionist measures that would result in "stagnated growth and harm our standard of living." Greenspan reiterated his view that low-skilled labor needs to be retrained.

Inventories at U.S. businesses rose a less-than-expected .1% in January as companies struggled to keep up with rising sales. The inventory-to-sales ratio held at a record low of 1.33 months. Factories will have to step up production in the coming months to replenish stockpiles, giving a boost to GDP, economists said.

The preliminary reading of the Univ. of Mich. Consumer Confidence Index for March was 94.1, slightly below expectations of 94.5. High gas prices, political negativity, the mainstream media's obsession with all that is negative and "slower-than-expected" job growth all contributed to the slight decline is confidence. "If you look at what consumers are doing as opposed to what they are telling pollsters, it's actually a pretty good story," said Henry Willmore, chief U.S. economist for Barclays Capital Inc. in New York.

BOTTOM LINE: Economic data points continue to show a rapidly growing economy. I am seeing signs that companies are missing out on sales due to their record low inventories. I expect that this will result in an accelerated rate of production shortly. I am not troubled by the decline in consumer confidence as long as retail spending remains strong. I also agree with Alan Greenspan's statements that good job creation will come shortly.