LIVE MARKETS-That aside, Mrs. Lincoln, how was the play? Wednesday economics

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THAT ASIDE, MRS. LINCOLN, HOW WAS THE PLAY? WEDNESDAY ECONOMICS

A data deluge on Wednesday suggested that the U.S. economic forecast would be mostly sunny were it not for the gathering clouds of uncertainty due to President Trump's erratic tariff war.

Receipts at U.S. retailers USRSL=ECI increased in March by 1.4%, a bit stronger than the 1.3% consensus and marking a solid improvement over February's paltry 0.2% gain.

Digging below the headline, 5.3% jump in motor vehicles/parts sales is the attention-grabber, suggesting American consumers attempted to beat expected auto tariffs to the punch.

So today's data could be a blip, rather than a trend.

"Surveys show consumers say now is a good time to buy ahead of an anticipated tariff-driven rise in prices," writes Michael Pearce, deputy chief economist at Oxford Economics. "Front-loading and the subsequent hangover in spending will exacerbate volatility in the data over coming months."

Building/gardening and sporting goods/hobbies rose by 3.3% and 2.4%, respectively, amid the first shoots of spring and warmer weather, which also likely helped boost food/drink services by 1.8%.

Receipts at gasoline stations dipped 2.5% and the closely watched non-store retail sales metric - which includes online shopping - gained a languid 0.1%.

The "control" figure, which excludes autos, gasoline, building supplies and food services - and is most closely correlated with the personal expenditures element of GDP - increased 0.4%, falling short of the 0.6% gain analysts expected.

Next, industrial output USIP=ECI dipped by 0.3% last month according to the Federal Reserve, steeper than the 0.2% decrease economists predicted and a reversal of February's 0.8% gain.

Manufacturing output increased by 0.3%, in line with expectations.

"The deep contradiction between President Trump’s goal of rebuilding U.S. manufacturing while also making life far more difficult for most manufacturers suggests that the current tariff regime is unlikely to last in the long term," says Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

Beneath the surface, subsiding winter weather was behind a 5.8% drop in utilities output, which helped drag the headline lower. But losses were held in check by respective 1.2% and 1.7% production increases of auto and business equipment production.

Capacity utilization USCAPU=ECI, a measure of economic slack, also lost steam, slipping by 0.4 percentage points to 77.8%, weaker than the 78.0 consensus.

Turning to the housing market, the mood among homebuilders has grown unexpectedly less dire this month.

The National Association of Homebuilders' USNAHB=ECI housing market index (HMI) gained one point to print at an even 40.

But 40 is still a dour reading; an NAHB number south of 50 indicates pessimism in the sector.

"Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions," says Robert Dietz, chief economist at NAHB. "The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases."

Sticking with the housing market, the mortgage rate/demand seesaw tilted the other way last week, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI jumped 20 basis points to 6.81%, the highest it's been since February, bouncing off the previous week's 6-month low.

As a result, applications for loans to purchase homes USMGPI=ECI slid by 4.9% and refi applications USMGR=ECI, which accounted for 41.3% of total mortgage activity, plunged 12.4%.

Combined, overall mortgage demand tumbled 8.5%.

Mortgage rates tend to ape benchmark Treasury yields, which spiked last week amid a bond rout prompted by President Donald Trump's chaotic trade policies.

"Economic uncertainty and the volatility in rates is likely to make at least some prospective buyers more hesitant to move forward with a purchase," said Mike Fratantoni, chief economist at MBA.

The average 30-year fixed rate is now 32 basis points cooler than it was during the same week last year.

Over the same time period, purchase and refi demand have improved by 12.8% and 68.1%, respectively.

And finally, in ancient history, business inventories USBINV=ECI increased by 0.2% in February, as expected. While a slight slowdown from January's 0.3% growth, any positive reading is welcome; private inventories have been a net GDP detractor for five of the eight most recent quarters reported.

(Stephen Culp)

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