Friday February 27 2015
US Consumer Sentiment Falls From 11-Year High in February
University of Michigan | anna@tradingeconomics.com

The University of Michigan's final reading on the overall index of consumer sentiment came in at 95.4 in February, much higher than a preliminary reading of 93.6. It was the first decrease in seven months reflecting bad weather and uptick in fuel cost.

The barometer of current economic conditions increased to 106.9 from a preliminary 103.1. In January, the current conditions index marked 109.3, the highest since Janaury 2007.

The final gauge of consumer expectations rose slightly to 88 from a preliminary 87.5. In January it was 91.

Americans expect the inflation rate in the next year will be 2.8 percent, compared with 2.5 percent in January. Over the next five to 10 years, they expect a 2.7 percent rate of inflation, compared with 2.8 percent in January.




Friday February 27 2015
US GDP Growth Revised Down to 2.2%
BEA | Joana Taborda | joana.taborda@tradingeconomics.com

The United States economy advanced an annualized 2.2 percent in the fourth quarter of 2014, according to the second estimate released by the Bureau of Economic Analysis. The new figure comes below a 2.6 percent advance estimate, due to lower fixed investment and higher imports.

The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, and decelerations in nonresidential fixed investment and in exports that were partly offset by an acceleration in PCE, an upturn in private inventory investment, and an acceleration in state and local government spending.

The GDP growth reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, state and local government spending, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from federal government
spending. Imports, which are a subtraction in the calculation of GDP, increased.

Real personal consumption expenditures increased 4.2 percent in the fourth quarter, compared with an increase of 3.2 percent in the third.  Durable goods increased 6.0 percent, compared with an increase of 9.2 percent.  Nondurable goods increased 3.8 percent, compared with an increase of 2.5 percent.  Services increased 4.1 percent, compared with an increase of 2.5 percent.

Real nonresidential fixed investment increased 4.8 percent in the fourth quarter, compared with an increase of 8.9 percent in the third.  Investment in nonresidential structures increased 5.0 percent, compared with an increase of 4.8 percent.  Investment in equipment increased 0.9 percent, compared with an increase of 11.0 percent.  Investment in intellectual property products increased 10.9 percent, compared with an increase of 8.8 percent.  Real residential fixed investment increased 3.4 percent, compared with an increase of 3.2 percent.

Real exports of goods and services increased 3.2 percent in the fourth quarter, compared with an increase of 4.5 percent in the third.  Real imports of goods and services increased 10.1 percent, in contrast to a decrease of 0.9 percent.

Real federal government consumption expenditures and gross investment decreased 7.5 percent in the fourth quarter, in contrast to an increase of 9.9 percent in the third.  National defense decreased 12.4 percent, in contrast to an increase of 16.0 percent.  Nondefense increased 1.4 percent, compared with an increase of 0.4 percent.  Real state and local government consumption expenditures and gross investment increased 2.0 percent, compared with an increase of 1.1 percent.

The change in real private inventories added 0.12 percentage point to the fourth-quarter change in real GDP after subtracting 0.03 percentage point from the third-quarter change.  Private businesses increased inventories $88.4 billion in the fourth quarter, following increases of $82.2 billion in the third quarter and $84.8 billion in the second.




Thursday February 26 2015
US Inflation Rate Turns Negative
BLS | Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in the US dropped 0.1 percent year-on-year in January, the lowest rate since late 2009. On a monthly basis, prices went down 0.7 percent due to falling gasoline cost.

Year-on-year, energy prices fell 19.6 percent, with gasoline recording the highest drop (-35.4 percent). Additional downward pressures came from utility gas service (-0.4 percent), used cars and trucks (-4.0 percent), and apparel (-1.4 percent). In contrast, food cost rose 3.2 percent. The index for all items less food and energy increased 1.6 percent.   

On a monthly basis, the energy index fell 9.7 percent as the gasoline index fell 18.7 percent in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1 percent had the gasoline index been unchanged. The fuel oil index also fell sharply, and the index for natural gas turned down, although the electricity index rose. The food index was unchanged in January, with the food at home index falling for the first time since May 2013.

The index for all items less food and energy rose 0.2 percent in January. The shelter index rose 0.3 percent, and the indexes for personal care, for apparel, and for recreation increased as well. The medical care index was unchanged, while an array of indexes declined in January, including those for household furnishings and operations, alcoholic beverages, new vehicles, used cars and trucks, airline fares, and tobacco.




Thursday February 26 2015
Durable Goods Orders Recover in January
US Census Bureau| anna@tradingeconomics.com

Orders for US capital goods grew by 2.8 percent in January, following a downwardly revised 3.7 percent fall in December. Excluding transportation, orders increased 0.3 percent after a 0.9 percent decline in the previous month.

New orders for manufactured durable goods in January increased $6.5 billion or 2.8 percent to $236.1 billion. This increase, up following two consecutive monthly decreases, followed a 3.7 percent December decrease. Excluding transportation, new orders increased 0.3 percent. Excluding defense, new orders increased 3.0 percent. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $6.0 billion or 9.1 percent to $72.1 billion.

Shipments of manufactured durable goods in January, down three of the last four months, decreased $2.7 billion or 1.1 percent to $245.1 billion. This followed a 1.5 percent December increase.Transportation equipment, down two of the last three months, led the decrease, $1.3 billion or 1.7 percent to $73.9 billion.

Unfilled orders for manufactured durable goods in January, down two consecutive months, decreased $2.0 billion or 0.2 percent to $1,163.4 billion. This followed a 0.9 percent December decrease. Transportation equipment, also down two consecutive months, led the decrease, $1.9 billion or 0.3 percent to $736.8 billion.

Inventories of manufactured durable goods in January, up twenty-one of the last twenty-two months, increased $1.8 billion or 0.4 percent to $412.5 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.5 percent December increase. Transportation equipment, also up twenty-one of the last twenty-two months, led the increase, $0.7 billion or 0.5 percent to $134.4 billion.

Nondefense new orders for capital goods in January increased $6.9 billion or 9.5 percent to $79.8 billion. Shipments increased $0.8 billion or 1.0 percent to $80.2 billion. Unfilled orders decreased $0.5 billion or 0.1 percent to $731.0 billion. Inventories increased $0.2 billion or 0.1 percent to $186.9 billion. Defense new orders for capital goods in January decreased $0.4 billion or 5.2 percent to $7.6 billion. Shipments decreased $1.3 billion or 12.0 percent to $9.2 billion. Unfilled orders decreased $1.7 billion or 1.1 percent to $153.4 billion. Inventories increased $0.2 billion or 0.7 percent to $24.2 billion.




Thursday February 26 2015
Jobless Claims Rise to 5-Week High
DOL | Nuno Fontes | nuno@tradingeconomics.com

The number of Americans filing new claims for unemployment benefits increased by 31,000 to a seasonally adjusted 313,000 in the week ending February 21st.

The previous week's level was revised down by 1,000 from 283,000 to 282,000. The 4-week moving average was 294,500, an increase of 11,500 from the previous week's revised average. The previous week's average was revised down by 250 from 283,250 to 283,000. 

The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending February 14, unchanged from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending February 14 was 2,401,000, a decrease of 21,000 from the previous week's revised level. The previous week's level was revised down by 3,000 from 2,425,000 to 2,422,000. The 4-week moving average was 2,399,000, an increase of 1,750 from the previous week's revised average. The previous week's average was revised down by 750 from 2,398,000 to 2,397,250. 




Wednesday February 25 2015
US New Home Sales Beat Expectations
U.S. Census Bureau | Joana Taborda | joana.taborda@tradingeconomics.com

Sales of new single-family houses were recorded at a seasonally adjusted annual rate of 481,000 in January, much better than market forecasts. Although sales edged down 0.2 percent from a revised 482,000 in December, supply increased to its highest since 2010.

The median sales price of new houses sold in January 2015 was $294,300; the average sales price was $348,300. The seasonally adjusted estimate of new houses for sale at the end of January was 218,000. This represents a supply of 5.4 months at the current sales rate.

Sales in the Northeast slumped 51.6 percent and those in the West dropped 0.8 percent. In contrast, sales in the Midwest rose 19.2 percent and those in the South went up 2.2 percent. 

Year-on-year, new home sales rose 5.3 percent in January.




Tuesday February 24 2015
Fed Flexible with Time of Rates Hike
Federal Reserve | Joana Taborda | joana.taborda@tradingeconomics.com

Federal Reserve is prepared to consider interest rate hikes on a meeting by meeting basis, if economic conditions continue to improve, Chair Janet Yellen said in a testimony before the Senate Banking Committee.

Extracts from Chair Janet L. Yellen Semiannual Monetary Policy Report to the Congress:

The FOMC's assessment that it can be patient in beginning to normalize policy means that the Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings. If economic conditions continue to improve, as the Committee anticipates, the Committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis. Before then, the Committee will change its forward guidance. However, it is important to emphasize that a modification of the forward guidance should not be read as indicating that the Committee will necessarily increase the target range in a couple of meetings. Instead the modification should be understood as reflecting the Committee's judgment that conditions have improved to the point where it will soon be the case that a change in the target range could be warranted at any meeting. Provided that labor market conditions continue to improve and further improvement is expected, the Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when, on the basis of incoming data, the Committee is reasonably confident that inflation will move back over the medium term toward our 2 percent objective.

It continues to be the FOMC's assessment that even after employment and inflation are near levels consistent with our dual mandate, economic conditions may, for some time, warrant keeping the federal funds rate below levels the Committee views as normal in the longer run. It is possible, for example, that it may be necessary for the federal funds rate to run temporarily below its normal longer-run level because the residual effects of the financial crisis may continue to weigh on economic activity. As such factors continue to dissipate, we would expect the federal funds rate to move toward its longer-run normal level. In response to unforeseen developments, the Committee will adjust the target range for the federal funds rate to best promote the achievement of maximum employment and 2 percent inflation.

The FOMC intends to adjust the stance of monetary policy during normalization primarily by changing its target range for the federal funds rate and not by actively managing the Federal Reserve's balance sheet. The Committee is confident that it has the tools it needs to raise short-term interest rates when it becomes appropriate to do so and to maintain reasonable control of the level of short-term interest rates as policy continues to firm thereafter, even though the level of reserves held by depository institutions is likely to diminish only gradually. 

In sum, since the July 2014 Monetary Policy Report, there has been important progress toward the FOMC's objective of maximum employment. However, despite this improvement, too many Americans remain unemployed or underemployed, wage growth is still sluggish, and inflation remains well below our longer-run objective. As always, the Federal Reserve remains committed to employing its tools to best promote the attainment of its objectives of maximum employment and price stability.




Friday February 20 2015
US Factory Activity Beats Expectations
Markit Economics | Joana Taborda | joana.taborda@tradingeconomics.com

The Markit flash U.S. manufacturing PMI rose to 54.3 in February from 53.9 reported in January and December. While production levels increased at fastest pace in four months, new business and employment slowed.

Manufacturing companies indicated a robust and accelerated expansion of production volumes during February. The latest increase in output was the most marked since October 2014, with survey respondents noting that improving economic conditions and rising client spending continued to boost production schedules.

Overall new order levels increased again in February, which marked five-and-a-half years of continuous new business expansion across the manufacturing sector. However, the latest rise in new work was the slowest for 13 months and export sales were close to stagnation in February. Some firms suggested that weaker demand for oil and energy infrastructure projects had weighed on new business intakes. Meanwhile, there were reports that subdued underlying export demand had contributed to softer gains in new work from abroad.  

February data indicated greater caution in terms of job hiring across the manufacturing sector. Payroll numbers increased only modestly and at the slowest pace for seven months. Meanwhile, manufacturers pointed to the slowest rise in input buying since January 2014 and inventory volumes increased only slightly since the previous month.

Suppliers’ delivery times lengthened at a sharp and accelerated pace in February. The latest deterioration in vendor performance was the most marked for 12 months. Anecdotal evidence attributed worsening lead-times to snow disruption in the northeast, as well as delays to the receipt of imported materials following the west coast port strikes. Manufacturers’ cost burdens continued to decline in February. Although the drop in input prices was only marginal, the latest index reading was the lowest since July 2012. Survey respondents cited falling prices for a range of commodities, especially steel. Meanwhile, factory gate charges increased at the slowest pace for two-and-a-half years.




Thursday February 19 2015
Jobless Claims Fall More Than Expected
DOL | Joana Taborda | joana.taborda@tradingeconomics.com

The number of Americans filing new claims for unemployment benefits declined by 21,000 to a seasonally adjusted 283,000 in the week ending February 14th, pointing that the recovery in the labor market was gathering stream.

The previous week's level was unrevised at 304,000. The 4-week moving average was 283,250, a decrease of 6,500 from the previous week's unrevised average of 289,750. There were no special factors impacting this week's initial claims.

The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending February 7, unchanged from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending February 7 was 2,425,000, an increase of 58,000 from the previous week's revised level. The previous week's level was revised up 13,000 from 2,354,000 to 2,367,000. The 4-week moving average was 2,398,000, a decrease of 9,500 from the previous week's revised average. The previous week's average was revised up by 3,500 from 2,404,000 to 2,407,500.


Wednesday February 18 2015
Fed Worried About Hiking Rates Too Soon
Federal Reserve | anna@tradingeconomics.com

Federal Reserve policymakers expressed concern that raising interest rates too soon could hamper U.S. economic recovery and were debating changes to policy tools when the rates would be increased, the January FOMC minutes showed.

The officials maintained that a decision on when to raise rates would remain dependent on economic data. From one side, a deterioration in the economic situation abroad and geopolitical tensions in the Middle East and Ukraine pose downside risks to the outlook for U.S. economy growth. On the other hand, lower oil prices and actions of foreign central banks both being supportive of growth abroad.

The Committee was also concerned about the impact that stubbornly low inflation  was having on the central bank's confidence in moving ahead with raising rates.

The Fed officials were also debating raising the cap temporarily on the overnight reverse repurchase facility (RPP) implemented last year to supplement two other more familiar policy rates when the time comes to lift borrowing costs.

Extracts from the minutes of Federal Open Market Committee meeting held in January:

Participants discussed considerations related to the choice of the appropriate timing of the initial firming in monetary policy and pace of subsequent rate increases.

Participants discussed the tradeoffs between the risks that would be associated with departing from the effective lower bound later and those that would be associated with departing earlier. Several participants noted that a late departure could result in the stance of monetary policy becoming excessively accommodative, leading to undesirably high inflation. It was also suggested that maintaining the federal funds rate at its effective lower bound for an extended period or raising it rapidly, if that proved necessary, could adversely affect financial stability. Some participants were concerned that a decision to delay the commencement of tightening could be perceived as indicating that an overly accommodative policy is likely to prevail during the firming phase. In connection with the risks associated with an early start to policy normalization, many participants observed that a premature increase in rates might damp the apparent solid recovery in real activity and labor market conditions, undermining progress toward the Committee's objectives of maximum employment and 2 percent inflation. In addition, an earlier tightening would increase the likelihood that the Committee might be forced by adverse economic outcomes to return the federal funds rate to its effective lower bound. Some participants noted the communications challenges associated with the prospect of commencing policy tightening at a time when inflation could be running well below 2 percent, and a few expressed concern that in some circumstances the public could come to question the credibility of the Committee's 2 percent goal. Indeed, one participant recommended that, in light of the outlook for inflation, the Committee consider ways to use its tools to provide more, not less, accommodation.

Participants discussed the communications challenges associated with signaling, when it becomes appropriate to do so, that policy normalization is likely to begin relatively soon while remaining clear that the Committee's actions would depend on incoming data. Many participants regarded dropping the "patient" language in the statement, whenever that might occur, as risking a shift in market expectations for the beginning of policy firming toward an unduly narrow range of dates. As a result, some expressed the concern that financial markets might overreact, resulting in undesirably tight financial conditions.