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Weekly Economic Update (1/27- 1/31)

Thomas Montalbano, Vicky Magginas

New Home Sales

Sales of new single-family houses in December 2013 went down 7% but are 4.5 % above compared to December 2012. Overall the housing market had a 16.4% growth in 2013.

Durable Goods- New orders for manufactured durable goods in December decreased $10.3 billion or 4.3 % to $229.3 billion. We saw and overall increase of 4.9% for 2013. Specifically, the demand for computers and electronics increases by 7.8% and the demand for motor vehicles and parts increased by 5.8%.

Consumer Confidence- hit a final reading of 81.2 in January, down from a final December level of 82.5. A preliminary estimate for January was 80.4. Consumer confidence is still relatively not indicative of consumer spending.

FOMC-As expected, the U.S. Federal Reserve on Wednesday voted unanimously to reduce asset purchases on Feb. 1 by another $10 billion a month to $65 billion. The reduction was evenly split, with the Treasury purchases cut by $5 billion to $35 billion and the mortgage-backed securities purchases trimmed by $5 billion to $30 billion. The Fed did not change its targets for inflation, short-term interest rates or its desired unemployment rate. Economists predict the Fed will wind down its bond-buying program by the end of the year. Key Points Unemployment rates declined but remain elevated Household spending and business fixed investment advanced more quickly in recent months Housing market recovery is slowing, faced with higher costs, low inventory and decreasing new and existing home sales Fiscal policy, (sequestration) did hurt economic growth but the extent to which it is damaging it is decreasing Looking for more inflation in the long-term while it remains

GDP - 3.2% Growth in Q4 For all of 2013, the economy expanded at a rate of 1.9 percent, well below the 2.8 percent growth pace in 2012. Consumer spending and business investment improved, showing healthier underlying growth in the economy. Consumer spending grew by 3.3%. Government expenditures when down 12.6% due to government shut down. Exports rose strongly (11.4% - mostly driven by energy) while inventories also increased by .44% in Q4. Jobless Claims - The Labor Department said weekly applications for unemployment benefits rose 19,000 last week to 348,000, the highest in about a month. But the broader trend in applications remains low. Total nonfarm payrolls in the United States are still more than a million below where they were immediately before the recession, even after nearly four years of slow recovery and a modest pickup in hiring more recently. And while the unemployment rate has fallen substantially in the last 12 months, to 6.7 percent in December, much of that drop has been caused by workers dropping out of the labor force rather than finding jobs.

Income and Outlays- Personal incomes were unchanged in December while consumer spending grew 0.4%.

Pending Home Sales-Pending home sales were predicted to decrease by 0.5%, while the actual decrease was 8.7%. This index has fallen for 7 straight months since May (Index: 111.3) and is now at is lowest since level since October 2011. Factors affecting : Home prices are rising faster than income. 30-year fixed mortgage rates have risked to 4.46% in December. Also, inventory is down which means restricted supply and less choices.