Economic Commentary for March 13th, 2013: Economic Data Beats Forecasts

chart-i3e1While Europe and the Fed have been the  major headlines recently, the economic data was clearly the main focus over the  past week. Stronger than expected data was a positive surprise to many  economists, but was bad news for mortgage rates, which moved considerably  higher.

On Friday, the biggest economic report  of the month, the Employment data, showed that the economy added more jobs than  expected in February. The Unemployment Rate declined from 7.9% to 7.7%, the  lowest level since December 2008. Wednesday’s Retail Sales report showed that  February Retail Sales increased 1.1% from January, far above the consensus of  0.5%, and the quickest monthly pace since September.The strong results are even more  surprising given the concerns caused by a lack of political agreement on the  budget, increased payroll taxes, and higher gas prices. All of this was  expected to hurt hiring and consumer spending, but the recent data has  contradicted this view. The improving economic outlook has lifted the stock  market and increased the willingness of people to purchase homes.  Unfortunately, stronger economic growth causes mortgage rates to rise.

Looking ahead, attention will turn to  the Fed meeting next Wednesday. Investors will be looking for signs of the  impact of recent strong economic data on Fed policy. Another focus for  investors is the March 27 budget deadline. Congress must take action by then to  keep funding the federal government.