Cabin Fever Ends in Week Ahead

An odd factor likely to alter the recent course of events in the consumer spending arena is the return of normal weather conditions and the early change in daylight-saving time. Both factors are likely to boost consumer spending after a soft month.

The fact is, February was either the coldest or the second-coldest February of the past 30 years, and the unseasonable weather was often relentless in much of the nation. This almost certainly affected the sale of spring merchandise. The break in the weather will push people into the stores, and brighter evenings will create a more cheerful spring shopping mood. It's just human nature, especially for American consumers, who are always looking for an excuse to go shopping.

Hints of a rebound in consumer spending could influence perceptions about the economy, pushing the recession fears that have cropped up recently further to the sidelines. Signs of acceleration in consumer spending will take at least a week to surface, so in the meantime the markets will have to contend with the possibility of weak news on the consumer front when the February retail sales report is released for February. Expectations are that the report will show a small 0.3% gain both overall and excluding automobiles, after soft readings in January.

The producer and consumer price indices are scheduled for release on Thursday and Friday. An increase of 0.2% is expected for both core readings. There might be a little more sensitivity to these reports at present because of the sharp upward revision reported this past week to unit labor costs, which were revised to show an annualized gain of a whopping 6.6%, double the estimates.

Still, investors might be just as forgiving of higher readings as they were a month ago when the January core CPI was reported up 0.3% and Treasury yields nonetheless fell. The focus remains on the potential for fallout from the housing market on the overall economy, a focus that arguably was intensified in Friday's payroll report, which showed that construction jobs fell their most since December 1991.

ALL TONY CRESCENZI BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market, first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.

TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.