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

Thomas Montalbano, Vicky Magginas

Monday
New Home Sales

Sales of new single-family houses in December 2013 went down 7% but are up 4.5 % compared to December 2012. Overall, new one family home sales grew by 16.4% on the year

Tuesday
Durable Goods- New orders for manufactured durable goods in December decreased $10.3 billion or 4.3% to $229.3 billion vs. expectations of a 1.8% gain. Bringing down the orders were decreases in Computers and electronics (-7.8%) and motor vehicles and parts (-5.8%) We saw and overall increase of 4.9% for 2013. 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, however it is a good leading indicator for overall economic health.

Wednesday
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 an increased amount of inflation to drive consumer spending

Thursday
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 and sequestration. Exports rose strongly (11.4% - mostly driven by energy) while inventories made up .44% of GDP growth for 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.

Friday
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, up a percentage point since May. Also, inventory is down which means restricted supply and less choice.