FED DECIDES TO NOT DECIDE

WEEKLY RETAIL SALES DROP

CONFIDENCE INDEX SLIPS A BIT

Just as everyone predicted, the Federal Reserve Open Market Committee decided this morning to leave short term interest rates unchanged. As I mentioned yesterday, recent upticks in some of the indicators have created the impression that the economy might be coming back to life again. So, for the time being, the Fed has decided to wait until it sees some more data. The next meeting of the FOMC is scheduled for May 21.

Mitsubishi Bank/Schroder Wertheim reported today that sales at the chain stores they survey decreased by 1.0 percent during the week ending March 23. This followed a gain of 1.2 percent in the preceding week and another gain of 1.0 percent in the week before that. Last week, Mitsubishi predicted that an early Easter would push March sales up by 5 percent.

This morning, the Conference Board announced that its consumer confidence index eased from 98.0 to 97.7 in the past month. Despite the big jump in new jobs earlier this month, the respondents to this month's survey were less optimistic about the job market than those who participated in the poll last month. In March, 26.5 percent of those surveyed perceived that jobs were hard to find. In February, 23.4 percent felt that the job market was difficult.

Each month I average the Conference Board index with the University of Michigan consumer confidence index to obtain a composite index that tends to smooth out month-to-month differences in the directions of the two indicators. The March composite reading is 96.7. This is up from a revised reading of 93.3 for February. The composite index bottomed at 93.1 last September and then rose during five out of the six succeeding months. So, it seems that the consumers polled by the two surveys have become progressively more optimistic during the past half-year.

Byline: Lafferty (MF Merlin)