{"id":1648,"date":"2020-01-28T11:32:23","date_gmt":"2020-01-28T16:32:23","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1648"},"modified":"2020-01-28T11:32:23","modified_gmt":"2020-01-28T16:32:23","slug":"december-durable-goods-orders-january-consumer-confidence-and-november-home-prices","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1648","title":{"rendered":"December Durable Goods Orders, January Consumer Confidence and November Home Prices"},"content":{"rendered":"\n

KEY DATA:<\/strong> Orders: +2.4%; Ex-Transportation:\n-0.1%; Core Capital Goods: -0.9%\/ Confidence: +3.4 points\/ Case-Shiller\nNational: +0.5%; Over-Year: +3.5% <\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cBusinesses remain cautious about investing\nand as long as that continues, the economy will only muddle along. \u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  I keep saying that the consumer needs some\nhelp and I keep reporting that businesses are not willing to provide that\nsupport.  That was true again in\nDecember.  Yes, durable goods orders did\nsurge during the month, but two-thirds of the gain came from defense aircraft\norders.<\/em><\/strong>  Now if you consider it\nabsolutely fine that government spending drives the economy, well that should\nnot be an issue.  But for those of us who\nthink businesses should invest, especially given the massive tax breaks they\nreceived, the durable goods report was another disappointment.  For all of 2019 compared to 2018, core capital\nspending (nondefense, nonaircraft) increased by less than one percent.  <\/em><\/strong>That is not good.<\/em><\/strong> The weakness in the latest report\nwas essentially across the board as there were order declines in the primary\nmetals, machinery, electrical equipment, computers, motor vehicles and\nnondefense aircraft sectors. <\/em><\/strong> Backlogs are shrinking and with inventories\nrising, it doesn\u2019t look good for industrial production.<\/p>\n\n\n\n

Meanwhile, consumers remain really happy.  The Conference Board\u2019s Consumer Confidence\nIndex rose solidly in December led by a jump in the Present Situation\ncomponent.<\/em><\/strong>  Views on current business conditions and the\nlabor market improved.  Optimism about\nthe future also picked up, especially when it came to expectations of future\nemployment opportunities.  <\/p>\n\n\n\n

As for the housing market, there are growing signs\nthat conditions are getting a little better, at least when it comes to\nprices.  The S&P CoreLogic\nCase-Shiller U.S. National Home Price Index increased strongly in November and\nthe year-over-year gain accelerated.<\/em><\/strong>  On a\nseasonally adjusted basis, every one of the major metro areas posted a rise in\nvalues, something that has not been seen often lately.   MARKETS AND FED POLICY IMPLICATIONS:<\/strong>Jobs\nare plentiful and consumer confidence is high, so why isn\u2019t the economy growing\nstrongly?  The problem remains the\ncautiousness of the business community and the ebbing gains in household\nincome.<\/em><\/strong>  Capital spending is\nmoribund and the major impacts of the 727 Max debacle are still to be\nfelt.  Boeing\u2019s assembly line shut down\nis just starting to filter through the system. \nBut it isn\u2019t just aircraft.  There\nare few sectors where investment spending is strong.  Indeed, for all of 2019, total durable goods\norders were down 1.5% compared to 2018.<\/em><\/strong> \nYes, taxes matter, but so do expected returns.  Uncertainty lowers the projections and as we\nsaw last year, reduces capital spending. \nIn addition, while restraining wage gains may be a goal of businesses,\nit also limits consumer spending capacity. \nSo, it may be fun to say the economy will soar this year, but you also\nhave to say where that added demand will come from and right now, that doesn\u2019t\nlook like it is coming from anywhere. \nWhich brings us to the Fed, the coronavirus, equity prices and interest\nrates.  Mr. Powell showed at the end of\n2018 that equity markets are critical to Fed policy.  The only major risk to growth right now is\nthe possibility of an epidemic that harms trade and the Chinese economy.  If that happens, we could see a consistent\ndecline in the markets.  Given the 2018\nexperience, calls would be coming for the Fed to cut rates<\/em><\/strong>, even if Mr.\nPowell knows that the economic impacts of the epidemic would disappear with the\nproblem being brought under control.  But\nMr. Powell used much of his ammunition last year fighting a phantom problem. <\/em><\/strong> The economy didn\u2019t fall apart and the interest\nsensitive sectors didn\u2019t respond to the rate cuts.   Will\nhe fight another war against a phantom enemy? \nWho knows?  But if he does, he\nwill likely have to use up the rest of his interest rate bullets.  How many pyrrhic victories can the Fed afford?\n<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Orders: +2.4%; Ex-Transportation: -0.1%; Core Capital Goods: -0.9%\/ Confidence: +3.4 points\/ Case-Shiller National: +0.5%; Over-Year: +3.5% IN A NUTSHELL:  \u201cBusinesses remain cautious about investing and as long as that continues, the economy will only muddle along. \u201d WHAT IT MEANS:  I keep saying that the consumer needs some help and I keep reporting … Continue reading December Durable Goods Orders, January Consumer Confidence and November Home Prices<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1648","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1648","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1648"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1648\/revisions"}],"predecessor-version":[{"id":1649,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1648\/revisions\/1649"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1648"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1648"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1648"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}