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In the News This Week

The economy expanded at a slower pace than previously estimated in the fourth quarter, the result of a smaller buildup of business stockpiles and a wider trade gap. Economic growth was cut to 2.2% as the increase in business inventories was revised down to $88.4 billion from $113.1 billion and the trade gap widened as imports increased 10.1% after a previous 8.9%. On the upside, consumer spending was still strong with a 4.2% gain – the largest since 2010.

On a negative note, existing home sales slipped to the lowest level in 9 months, falling 4.9% to an annual pace of 4.82 million to mark the lowest since last April as “low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows”. Among January’s sales, 8% were foreclosures and 3% were short-sales.

On a brighter note, new home sales managed to avoid a January dip with an annual pace of 481,000, basically unchanged from December.

While existing home sales slipped, pending home sales started the year on a positive note, climbing 1.7% to the highest level since August 2013, and up 8.4% over January 2014. “Contract activity is convincingly up compared to a year ago despite comparable inventory levels. The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth”, according to the National Association of Realtors.

Durable goods orders rose 2.8% in January, marking the biggest increase in six months. The increase was in part due to a 129% rise in commercial aircraft orders.

Consumer prices fell in January for the third month in a row as inflation turned negative on a yearly basis for the first time since 2009. The pace of inflation over the past 12 months fell to -.1%, driven by the drop in gasoline prices. Energy prices plummeted 9.7%, bringing the decline over the past year to 19.6%.

Consumer confidence declined in February after reaching a 7-year high in January. The Conference Board’s Consumer Confidence Index fell to 96.4 from 103.8 as consumers worried about the outlook in the months ahead: “fewer consumers expect conditions to improve, prompting a less upbeat outlook. Despite this month’s decline, consumers remain confident that the economy will continue to expand at the current pace in the months ahead”.


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