Since it’s a holiday week, we’re reviewing the latest economic data early. Don’t worry about catching every headline and every report throughout this busy week—I recap all of the most important news impacting your wealth right here. Let’s take a look at this week’s big headlines:
Third-Quarter GDP Increases (Third Estimate)
On Tuesday, the Commerce Department reported that GDP increased at a 2% annual rate in the third quarter, down from the previous estimate of 2.1%. The trade deficit and a slowdown in inventory rebuilds were the main reasons for the downgrade. At the current pace, which is averaging out to 2.2% for the first three quarters of 2015, the U.S. economy is likely to fall short of the 3% growth rate for the 10th-straight year.
Existing Home Sales Drop
The National Association of Realtors revealed that the pace of existing home sales dropped 10.5% in November to an annual rate of 4.76 million units. This marked the steepest decline since July 2010 and missed economists’ forecasts for existing home sales to rise to 5.35 million units. Sales were down nationwide, likely due to new regulations, rising home prices and dwindling inventories. The Fed’s interest rate hike, which supports higher home prices, could further dampen existing home sales in the New Year.
Durable Goods Orders Remain Unchanged
In November, orders for durable goods orders remain unchanged after the 2.9% increase in October. Orders for core capital goods, which excludes aircraft and defense, fell 0.4% last month. New cars and trucks orders increased 1.5%, while commercial jet orders plunged 22.2%. The strong U.S. dollar and weakening global economy continues to inflate the prices of U.S. goods, which is negatively impacting U.S. exports and the manufacturing sector as a whole. Year to date, durable goods orders are down 3.7%.
Personal Income Rises
The Commerce Department reported on Wednesday that personal income rose 0.3% in November. This was slightly higher than economists’ forecasts for a 0.2% increase. Wages and salaries advanced 0.5% last month. Consumer spending also rose 0.3% in November, following October’s flat reading. This report shows the eighth-straight increase in personal income, which bodes well for stronger consumer spending and GDP growth in the fourth quarter.
University of Michigan Consumer Sentiment Index at Five-Month High (Final)
The University of Michigan’s Consumer Sentiment Index reported a final December reading of 92.6, up from the previous reading of 91.8. This was the highest reading since July and beat economists’ forecasts for 92. The current conditions index increased to 108.1, while the consumer expectations sub-index slipped to 82.7. An improving labor market and low fuel prices has clearly put the U.S. consumer in the holiday spirit.
New Home Sales Rise
In November, new home sales rose 4.3% to a seasonally adjusted annual rate of 490,000, which missed economists’ estimates for 504,000. October’s new home sales were revised down to 470,000 from 495,000. New home sales are now up 9.1% year-over-year. At the current sales pace, it would take 5.7 months to deplete supply. Year to date, new homes sales have increased 14.5%. While new home sales only account for approximately 10% of the U.S. housing market, the increase last month is a positive sign for the recovering housing market.
From all of us here at Navellier Growth, I would like to wish you and yours a happy holiday.