Comerica Economic Weekly

U.S. economic data from the end of February are consistent with an economy that expanded through the winter, but at a slower rate than we saw through the middle of last year.

Fourth quarter real GDP growth was revised down to 2.2 percent with the second estimate released today. The lead cause of the downward revision to growth was weaker inventory accumulation. Consumer spending was the biggest driver of growth, adding 2.8 percent to Q4 real GDP growth. Trade was a big drag, subtracting 1.2 percent from total GDP growth. The consumer spending component was juiced by health care services, related to the rollout of the Affordable Care Act, and so that will not be sustained. This clearer view on Q4 GDP allows us to bring our estimate of Q1 real GDP growth up to around 2.5 percent.

Existing homes sales dipped by 4.9 percent in January, to a 4.82 million unit rate. Bad weather was a factor. New home sales were essentially flat in January, easing by 0.2 percent to a 481,000 unit annual rate. Home price picked up in December. The Case-Shiller 20-City Composite Index gained a strong 0.9 percent for the month, resulting in a 4.5 percent gain over the previous 12 months.

Consumer prices fell in January, pulled down by gasoline. The headline CPI dropped by 0.7 percent. Gasoline prices were down almost 19 percent for the month. Over the previous 12 months, headline CPI dipped by 0.1 percent. Core CPI (less food and energy) gained 0.2 percent in January and showed a 1.6 percent gain over the previous 12 months.

New orders for durables goods increased by 2.8 percent in January, after falling through November and December. Both civilian and military aircraft have been somewhat volatile lately. A core measure, nondefense capital goods excluding aircraft, was up by 0.6 percent in January.

Initial claims for unemployment insurance increased by 31,000 for the week ending February 21, to hit 313,000. It still looks like we are trending just under 300,000, which is a very healthy number. Continuing claims dropped by 21,000 for the week ending February 14, to reach 2,401,000.

The Conference Board’s Consumer Confidence Index fell in January to 96.4, after surging in December. This does not look like a sudden downgrade in consumer attitudes, but rather reflects a reset after the December spike.

FOMC chairwoman Janet Yellen testified before House and Senate committees this week. She remained consistent in her approach to monetary policy normalization, giving herself plenty of wiggle room for the exact timing of interest rate lift-off later this year. We continue to look for a June move, with September as our second choice. We look for a further revision to forward guidance on interest rates on March 18.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly 02-27-15.

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