Get Caught Up On The Economy

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:

Existing Home Sales Edge Up

The National Association of Realtors announced that sales of existing homes climbed 1.2% in February to a seasonally adjusted 4.88 million pace. This was slightly below economists’ expectations for 4.92 million. At the current sales pace, it would take 4.6 months to sell all of the homes currently on the market. Housing inventory increased 1.6% in February to 1.89 million existing homes. After sales of existing homes fell in January, it is a positive sign that more homes were sold last month. Compared to a year ago, existing home sales were up 4.7% in February. And as weather warms up, we’ll likely see sales creep higher.

Consumer Price Breaks Losing Streak

The Labor Department reported that the CPI increased 0.2% in February, breaking a three-month streak of declines. This was right in line with economists’ expectations. Excluding food and energy prices, core CPI climbed 1.7% compared to the prior year. The tick higher in the CPI last month can be attributed mainly to the 1% rise in gasoline prices in February. Oil prices still remain significantly lower than last year–and the strength of the U.S. dollar and falling oil prices will likely continue to weigh on the CPI in the coming months.

New Home Sales Trump Estimates

In February, sales of new homes increased 7.8% to a seasonally adjusted annual rate of 539,000. That walloped economists’ projections for an annual rate of 470,000. January’s new home sales were also revised higher to 500,000, up from 481,000. This marked the highest level of new homes sales since February 2008–and it was also the first back-to-back months of gains above 500,000 since April-May 2008. So despite the cold winter months in much of the U.S., buyers were not deterred.

Durable Goods Orders Fall

In February, orders for durable goods declined 1.4%, which missed economists’ projections for a small increase. Excluding the transportation sector, durable goods orders slipped 0.4%. January orders were revised lower to 2%, down from a 2.8% increase. This was the third decline in durable goods orders in four months, and implies that many companies are cautious given the slowing global economy. As a result, some economists have lowered their GDP forecasts for the first quarter.

Jobless Claims Drop to 5-Week Low

For the week ending March 21, initial claims for unemployment fell to a seasonally adjusted 282,000 rate, which was better than economists’ expectations for 290,000. The four-week moving average slipped to 297,000. Jobless claims are now at their lowest level since mid-February, signaling that the U.S. labor market continues to improve.

GDP Growth Rate Remains the Same

The U.S. economy grew at a 2.2% annual pace in the fourth quarter, according to the third estimate issued by the Bureau of Economic Analysis. Economists expected the growth rate to be revised up to 2.4%, while the government estimated a 2.6% growth rate back in January. Consumer spending grew 4.4% last quarter, outperforming previous estimates of 4.2%. Exports were also more robust, increasing to 4.5%, compared to the 3.2% previously reported. While the economy did take a breather in the fourth quarter, the overall pace is still much healthier than what is expected to be reported for the current quarter. A harsh winter combined with weaker-than-expected economic data recently will impact the first quarter more than previously expected.

Consumer Confidence Slips

The University of Michigan’s Consumer Sentiment Index finished the month of March at a 93.0 reading.Economists were expecting a 91.0 reading, so this was stronger than expected. However, this is a drop from last month’s rating of 95.4, and harsh winter conditions are partially to blame for the pullback. A rough winter and a slight oil rebound in March caused consumer confidence to edge lower, with lower income households being impacted the most. However, the report stated that consumer sentiment overall has been mostly positive, and it reach a 10-year high at 95.5 in the first quarter.

That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes on Monday.

Have a great weekend,

Louis Navellier

Louis Navellier

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