This Week in 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:

Consumer Confidence Increases

In January, the Conference Board’s consumer confidence index increased to a reading of 98.1, up from the revised December reading of 96.3. This topped economists’ estimates for a 96.5 reading this month. Breaking it down further, the consumer expectations sub-index rose to 85.9, while the current conditions sub-index remained steady at 116.4.Consumer confidence is now at a three-month high. Consumers are clearly in better spirits right now, thanks in part to low fuel prices at the pump, low inflation and an improving jobs market.

New Home Sales Rise

The Commerce Department reported that new home sales increased by 10.8% in December to an annual rate of 544,000 units, which topped economists’ estimates for an annual rate of 500,000. November’s sales pace was revised higher to 491,000. At the current sales pace, it would take 5.2 months to deplete supply. Last month’s increase marked the third-straight monthly gain. In 2015, overall, new home sales rose 14.5%, thanks in part to low mortgage rates, an improving jobs market and increased consumer confidence. But I must add that new home sales are still below the historic 655,200 average, so there is still more ground to make up.

Initial Claims for Unemployment Drop

For the week ending January 23, initial claims for unemployment dropped by 16,000 to 278,000. Economists were expecting claims to fall to 280,000. The four-week moving average also decreased, falling by 2,250 to 283,000. While jobless claims have been volatile recently, this past week’s drop suggests that the labor market is continuing to recover, despite a slowing economy and stock market uncertainty.

Durable Goods Orders Decline

Durable goods orders declined 5.1% in December, following up a 0.5% drop in November. This missed economists’ estimates for a 0.6% decline last month. Capital goods orders, which exclude aircraft and defense, slipped 4.3%, also missing estimates for a 0.2% fall. Durable goods orders have now fallen four of the past five months, due to global economic weakness, low crude oil prices and a strong U.S. dollar continuing to weigh on manufacturers. Much of December’s decline, though, can be attributed to a 29.4% plunge in commercial aircraft demand and a 46% drop in defense orders. Economists are now looking to cut their fourth-quarter GDP forecasts due to the weakness in this report.

Fourth-Quarter GDP (Advanced Estimate) Expands

The Commerce Department reported that GDP expanded at a 0.7% annual rate in the fourth quarter, down sharply from 2% growth in the third quarter. For full-year 2015, GDP increased at a 2.4% annual rate, unchanged from 2014. Weak exports, rising inventories and soft consumer spending continued to weigh on economic growth last quarter. As a result, U.S. GDP growth will fall short of 3% for the 10th-straight year.

University of Michigan Consumer Sentiment Index (Final) Falls

The University of Michigan’s Consumer Sentiment Index reported a final reading of 92 in January, which just missed economists’ forecast for a 93 reading and fell from 92.6 in December. The current conditions index also slipped, falling to 106.4 from 108.1. The consumer expectations sub-index remained the same at 82.7. Clearly, the volatile stock market and slowing global economic growth weighed on consumers’ minds in January.

Have a great weekend,

Louis Navellier

Louis Navellier

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