It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines, starting with this morning’s big GDP report:
Q4 GDP Growth Misses Expectations
The Commerce Department reported this morning that U.S. GDP growth grew at a 2.6% annual rate in the fourth quarter, after expanding 5% in the third quarter and 4.6% in the second quarter. This was lower than economists’ expectations for 3.2% growth. In 2014, U.S. GDP growth averaged a 2.4% pace, which is slightly above the 2.2% growth between 2010 and 2013. The U.S. consumer remains the primary driver of economic growth in the U.S., and consumer spending was 4.3% in the fourth quarter, which bodes well that the U.S. economy will maintain its moderate growth rate.
Durable Goods Fall in December
Orders for durable goods slipped 3.4% in December, which marked the fourth decline in the past five months and the worst performance since August. Economists were expecting durable goods orders to increase 0.3% last month. The main culprit for the unexpected dip was a 55.5% plunge in commercial aircraft orders. To be sure, this was a disappointing report, and has some questioning if the U.S. economy can maintain 3% GDP growth in the fourth quarter of 2014. But what we need to remember is that durable goods orders are often volatile. The government tends to revise these estimates as more information and data becomes available. Plus, durable goods orders for all of 2014 increased 6.2% over 2013–which is a positive improvement for the U.S. economy.
Consumer Confidence Soars
In January, the Conference Board’s index of consumer confidence increased to 102.9, up from a revised 93.1 in December. This beat economists’ expectations for the index to rise to 95.1. U.S. consumer confidence is now at its highest level since August 2007, and that bodes well for continued strength in consumer spending.
The Thomson Reuters/University of Michigan Consumer Sentiment Index’s final January reading was 98.1, up from 93.6 in December. This is slightly under economists’ expectations for a reading of 98.2, but the best reading since January 2004. The U.S. consumer is definitely more optimistic, thanks to a better job market and low energy prices. As such, we’ll likely see continued strength in consumer spending and GDP growth continuing its moderate pace.
New Home Sales Reach Six-Year High
In December, new home sales surged 11.6% to a seasonally adjusted annual rate of 481,000.That was well above economists’ forecast for sales to reach a 450,000 pace. In addition, sales for October and November were revised higher. New home sales are now at their highest level since June 2008. Lower mortgage rates and an improving job market are adding to the renewed strength in the housing market.
Layoff Activity Falls to Lowest Levels in 15 Years
For the week ended January 24, initial claims for unemployment dipped by 43,000 to a seasonally adjusted rate of 265,000. Economists were only expecting claims to fall to a 300,000 pace. The four-week moving average has now fallen back below 300,000 to 298,500. With the recent dip, unemployment claims are at their lowest level in about 15 years, which is a positive sign that the U.S. labor market continues to improve.
That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes and Stock of the Day on Monday.
Have a great weekend,