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In the News This Week

After growing at the fastest pace in 11 years, the US economy slowed in the fourth quarter to a 2.6% pace. While consumer spending accelerated 4.3%, the fastest clip since 2006, that was offset by weak business spending and a wider trade deficit. For all of 2014, the economy grew 2.4%.

At the first FOMC meeting of 2015, the Fed was more upbeat about the economy while repeating its pledge to be “patient” on hiking interest rates. In its statement, the Fed reported that “economic activity has been expanding at a solid pace” and “labor market conditions have improved further”. The central bank downplayed low inflation, noting that while inflation “is anticipated to decline further in the near term”, it will likely gradually rise toward its 2% target “over the medium term”.

On a positive note, consumer confidence jumped to the highest level in over seven years on falling gas prices and an improving labor market. The Conference Board’s consumer confidence index rose to 102.9, its best reading since August 2007, as the share of Americans who said jobs were plentiful rose to the highest since February 2008.

Sales of new homes rose sharply in December, climbing 11.6% to an annual pace of 481,000. That gain brought the 2014 total to 435,000 new homes sold…a modest 1.2% above the 2013 total, but the highest level in six years.

While new home sales surged in December, pending home sales declined 3.7%, which the National Association of Realtors attributed to “fewer choices for home buyers” as inventory fell, along with “a modest uptick in price growth”.

On a downbeat note, durable goods orders plunged 3.4% in December on broad weakness, led by a 55.5% drop in commercial aircraft. This marks the fourth decline in the past five months.


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