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:
Q4 GDP (Second Estimate)
The U.S. economy grew at an annual rate of 1.9% in the fourth quarter. This was below the previous estimate of 2.1% annual growth, and well below the 3.5% growth logged in the third quarter. All told, the U.S. economy grew just 1.6% in 2016, the slowest growth since 2011.
The good news is that consumer spending was stronger than previously estimated, rising 3.0% compared with the original estimate of 2.5%. Meanwhile, imports surged 8.5%, compared with the initial estimate of 8.3%. This, coupled with declining exports, dragged down overall GDP growth.
So, as was expected, the economy wasn’t able to keep up its blistering pace from the third quarter. This will likely influence the Fed as it weighs whether or not to raise key interest rates at its next meeting in mid-March.
Consumer Confidence Report
The Conference Board reported that its Consumer Confidence index increased sharply to 114.8 in February, up from 111.6 in January. This is the highest level in over 15 years. The Present Situation component rose to 133.4, up from 130.0 in January. Clearly, the “Trump bump” is increasing confidence on Main Street as well as Wall Street.
Personal Spending and Income
In January, personal income rose $63.0 billion, or 0.4%, which was in line with economists’ estimates. Meanwhile, personal spending rose 0.2%, which was a hair below economists’ estimates of a 0.3% increase. This represents a slowdown from the 0.5% gain reported in December. What’s interesting is that consumers are being a little more cautious with their wallets, despite consumer confidence being at a 15-year high.
The Commerce Department reported that U.S. construction spending declined 1.0% to an annual rate of $1.18 trillion in January. This was well below economists’ expectations of 0.6% growth. Total private construction rose 0.2%, which public construction plunged 5.0%. Meanwhile, December construction spending was revised to reflect a 0.1% increase, a turnaround from the previously reported 0.2% decline.
Last week, initial claims for unemployment plunged by 19,000 to an annual rate of 223,000. Economists had called for a 244,000 rate so this was stronger than expected. Meanwhile, the more stable four-week moving average slipped 6,250 to 234,250. This is the lowest such reading since 1973.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,