--- title: "Monday Update (on Tuesday): Consumers Lead the Way" description: Commonwealth's Brad McMillan recaps last week's economic news and highlights what to watch in the week ahead. image: https://blog.commonwealth.com/hubfs/Brad_Images_IMO_Blog/2017/MarketOutlook_1.jpg --- [![The Independent Market Observer](https://blog.commonwealth.com/hubfs/IMO-Title-1.png "The Independent Market Observer")](https://blog.commonwealth.com/independent-market-observer) [![Commonwealth Financial Network](https://blog.commonwealth.com/hubfs/lockup_citron-1.png "Commonwealth Financial Network")](https://www.commonwealth.com/) - [Home](https://blog.commonwealth.com/independent-market-observer) - [About](https://learn.commonwealth.com/about/) ### ![print this page](https://blog.commonwealth.com/hs-fs/file-1376458285-gif/images/print.gif)Print # [Monday Update (on Tuesday): Consumers Lead the Way](https://blog.commonwealth.com/independent-market-observer/monday-update-on-tuesday-consumers-lead-the-way) Posted by [Brad McMillan, CFA®, CFP®](https://blog.commonwealth.com/independent-market-observer/author/brad-mcmillan-cfa-caia-mai) Find me on: [LinkedIn](https://www.linkedin.com/in/bradmcmillancfa) [Twitter](https://x.com/BradMcMillanCFA) This entry was posted on Feb 21, 2017, 5:57:55 PM and tagged [In the News](https://blog.commonwealth.com/independent-market-observer/topic/in-the-news) [Leave a comment](https://blog.commonwealth.com/independent-market-observer/monday-update-on-tuesday-consumers-lead-the-way#comments-listing) ![Monday Update](https://blog.commonwealth.com/hs-fs/hubfs/Brad_Images_IMO_Blog/2017/MarketOutlook_1.jpg?width=300&name=MarketOutlook_1.jpg "Monday Update")Last week’s flurry of economic data was generally positive, either coming in surprisingly strong or much better than it looked. Both rising prices and faster consumer spending growth reflected an improving[economy](https://blog.commonwealth.com/independent-market-observer/economic-risk-factor-update-february-2017). On a less positive note, industrial production was down due to warm weather dragging on utilities, but manufacturing continued its slow growth. Overall, the recovery marches on, and there are signs that rising confidence will continue to boost the economy. ##### **A look at last week’s news** **Headline inflation surprised on the upside**, growing by 0.6 percent in January, well above the expected 0.3-percent increase. The year-on-year figure also rose significantly, from 2.1 percent to 2.5 percent, which is a five-year high. The core inflation index, which excludes food and energy, beat expectations more modestly, rising 0.3 percent for the month (against expectations of 0.2 percent) and 2.3 percent year-on-year (against expectations of 2.1 percent). The difference between the two measures continues to be energy prices, which rose substantially in January. Still, the increase in inflation above the Federal Reserve’s target suggests that the pressure to raise rates will likely continue to build. **Retail sales beat expectations with a solid 0.4-percent increase**, well above the expected 0.1 percent, along with an upward revision to December’s data, from 0.6 percent to 1.0 percent. January’s result was strong, and the decline from the previous month was primarily due to a dip in car sales (of limited concern, as it was from an 11-year high). Core retail sales, excluding autos and gas, did even better, growing by 0.7 percent, above expectations of 0.3 percent and up from 0.1 percent the previous month. This rise in spending shows that growing consumer confidence and continued improvement in the jobs market should keep consumers on track as a driver of economic growth. **Industrial production disappointed**, but the details of the report were much better than the headline figure would suggest. The headline number dropped by 0.3 percent, down from growth of 0.6 percent in December and below expectations of a flat result. The cause of the overall decline, however, was a drop in utility output, which was down by the most in 11 years on unseasonably warm weather in January. Apart from this, the rest of the industrial sector seems to have continued to grow. Manufacturing output growth held steady at 0.2 percent, in line with expectations, continuing the recovery in that sector. **The National Association of Home Builders survey dropped** for the second month in a row back into a normal range, from 67 to 65, suggesting that the housing market is normalizing rather than accelerating. Housing starts, however, edged up on Friday with a report of 1.246 million, up from 1.226 million in December, while the previous two months were revised upward by a very large 100,000 units. The 12-month average has continued to rise and is now at the highest level since April 2008. Clearly, despite the normalization of industry confidence, actual starts remain elevated. **Fed Chair Janet Yellen’s semiannual testimony to Congress offered no real news**, as expected, but she did continue to paint a relatively optimistic picture of the economy, suggesting that rate hikes remain likely through the remainder of the year. Last week’s inflation data also supported that point. ##### **The week ahead** This week we’ll get another look at the housing industry, with **existing and new home sales** numbers released on Wednesday and Friday, respectively. Existing home sales are expected to increase from 5.49 million to 5.55 million, while new home sales are expected to rise from 536,000 to 575,000—a rebound from December declines for both. Downside risks include a lack of inventory, but demand appears to remain strong. The minutes of the last meeting of the **Federal Open Market Committee** will be released on Wednesday. Although Yellen’s testimony to Congress last week largely superseded them, markets will still be watching the minutes closely to gauge the committee’s confidence in the economy and look for any hints of likely rate increases. Have a great week! - [Tweet](https://twitter.com/share) ### Subscribe via Email ![TMO\_IMO\_615x408\_sidebar](https://blog.commonwealth.com/hs-fs/hubfs/TMO_IMO_615x408_sidebar.png?width=1033&height=686&name=TMO_IMO_615x408_sidebar.png "TMO_IMO_615x408_sidebar") [Episode 20](https://vimeo.com/1201911815/0f4f028be9?share=copy&fl=sv&fe=ci) June 17, 2026 [Episode 19](https://vimeo.com/1191658257/1b43ce84dd?share=copy&fl=sv&fe=ci) May 13, 2026 [Episode 18](https://vimeo.com/1183174918/e227cf7d80?share=copy&fl=sv&fe=ci) April 15, 2026 [Episode 17](https://vimeo.com/1174554734/636f0f7aba?share=copy&fl=sv&fe=ci) March 18, 2026 [Episode 16](https://vimeo.com/1163757312/bc2f802d74?share=copy&fl=sv&fe=ci) February 11, 2026 [More](https://learn.commonwealth.com/monthly-media-placements) [![Insights\_CTA\_IMO\_233x400-1](https://no-cache.hubspot.com/cta/default/295024/interactive-187935228457.png)](https://blog.commonwealth.com/hs/cta/wi/redirect?encryptedPayload=AVxigLJV2LoG4FURi9qAYSJAtIcX1dA41UOqTl8%2FXrp6%2BjqVmVz%2F%2B7X8HiPUbvX2K2GznlES4u79cAVuLXi0%2F8Ro1LCZv1OMdjQ0pS3HGRzgPU%2BqRPavlkm3u3vMk8VGDCq%2BeUkEh9Hpk9PI%2FIEkSAxx9bNJ3JYseNcOVokmYoW733QyppGjLvmzotiWkVMXRAYhBO7JJ93Vx1VFgXk%3D&webInteractiveContentId=187935228457&portalId=295024) ### Hot Topics Select Category Ask Brad Commentary Economic Risk Factor Updates Economics Lessons Market Thoughts Videos In the News Investing Market Updates On My Bookshelf Politics and the Economy [![New Call-to-action](https://no-cache.hubspot.com/cta/default/295024/5f46d9ce-4d40-495c-a126-d4502b647bbf.png)](https://cta-redirect.hubspot.com/cta/redirect/295024/5f46d9ce-4d40-495c-a126-d4502b647bbf) ### Archives - 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