Heavily Taxed Week in Review

Auto tariffs, inflation, sentiment, & more

The White House slapped 25% tariffs on car imports this week, a prelude to the reciprocal tariffs to be announced next week.¹ It leaked this morning that Trump has warned automakers not to raise prices, though it’s unclear how they can swallow an alleged $100 billion tax increase without passing a lot of the hit on to consumers.

So it’s not a surprise that both stocks and economic confidence have plunged this week—current sentiment measures range from mildly depressed to burning with the rage of a thousand suns (see the comments from oil executives under Wednesday).

But that’s just sentiment. I hate tariffs as much as anyone (and think this could end very badly), but there’s been a disconnect between how people feel about the economy and how it actually performs for a few years now.

That’s why we focus on hard data sources, including this week’s updates on home sales, durable goods orders, household income, spending, and saving, and the important PCE Price Index (the Fed’s preferred measure of inflation).

Monday

Natural Gas Prices

Natural gas prices are up 167% over the past year. While tariffs will continue to put upward pressure on prices, they should drift lower during the spring.

S&P Global Flash US PMI

We usually don’t cover this measure (preliminary results from an S&P survey of purchasing managers), but this advanced March release shows the emerging effects of policy uncertainty:

“Business confidence in the outlook has also darkened, souring further from the buoyant mood seen at the start of the year to one of the gloomiest readings seen over the past three years, largely caused by growing worries over negative impacts from recent policy initiatives from the new administration.”

Gas Prices & Diesel Prices

Gas prices increased this week, rising to $3.24/gallon and ending a streak of four straight weekly declines. Again, gas prices typically rise throughout spring, though other factors (namely higher OPEC+ production) could make it a smaller-than-usual seasonal increase.

Diesel prices inched slightly higher, up to $3.57/gallon, but are still pretty low by recent standards.

TSA Checkpoint Travel Numbers

Air travel remains about 2% above 2024 levels, according to TSA data. Given a few other signs of weakness, this is encouraging. Of course, travel would likely be doing better if not for aggression toward Canada…

Tuesday

Conference Board Consumer Confidence Index

Consumer’s forward looking expectation fell to the lowest level since 2013. Overall consumer sentiment fell pretty sharply for the month too, with the decline concentrated in consumers aged 55+. Consumers became more pessimistic about the stock market, the labor market, inflation, and just about everything else, too.

While consumers’ view of the present situation is falling too, that component has held up much better than the expectations index.

New Home Sales

Sales of newly built homes picked up in February, rising about 2% from January and 5% from February 2024. Big picture, new home sales are roughly in line with the pre-pandemic level. While that’s a big decrease from 2021-22 levels, it’s still pretty impressive given how high rates are.

To me, the bigger story here is that the supply of new homes for sale eclipsed 500,000 for the first time since November 2007. While overall inventory levels remain low due to a dearth of existing homes on the market, builders are doing their part to boost supply.

Wednesday

Automobile Tariffs