{"id":1672,"date":"2020-02-27T13:04:54","date_gmt":"2020-02-27T18:04:54","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1672"},"modified":"2020-02-27T13:04:54","modified_gmt":"2020-02-27T18:04:54","slug":"january-durable-goods-orders-pending-home-sales-and-revised-fourth-quarter-gdp","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1672","title":{"rendered":"January Durable Goods Orders, Pending Home Sales and Revised Fourth Quarter GDP"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Orders: -0.2%; Ex-Aircraft: -2.5%; Capital\nSpending: +1.1%\/ Pending Sales: +5.2%; Over-Year: +5.7%\/ GDP: +2.1% (Unchanged)\n<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cOther than housing, there is not a lot of\noomph in the economy.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Yes, it is all about Covid-19, but the economic\ndata keep coming in and they provide a picture of the state of the economy just\nin case the virus strikes the U.S. hard.<\/em><\/strong>  Today\u2019s key number was durable goods\norders.  Demand for big-ticket items were\noff in January slightly, but the decline was kept to a minimum because civilian\naircraft orders surged by 346%.<\/em><\/strong> \nI prefer to take out aircraft, as rising or falling orders for civilian\nor military planes don\u2019t usually translate into changes in production in the\nnear term.  When you do that, demand for\nbig-ticket items was off sharply. But the other details in the report indicate\nthat business investment is holding in but not booming.<\/em><\/strong>  The best measure of capital spending,\nnondefense\/nonaircraft orders, rose solidly, after having declined in December.  Orders for machinery, computers and metals\nrose.  However, demand for communications\nequipment, electrical equipment and vehicles were down.  With backlogs flat for the past two months,\nit is not clear we will see any pick up in production.  <\/em><\/strong><\/p>\n\n\n\n

The strongest sector, at least for now, is housing\nand pending home sales jumped in January. \nThe National Association of Realtors\u2019 index rebounded from a large drop\nin December.<\/em><\/strong>  The index level is solid and\npoints to an uptick in home sales over the next couple of months.  <\/p>\n\n\n\n

The Bureau of Economic Affairs released its second\nestimate of fourth quarter growth and it was unchanged from its initial\ncalculation.  There were only small\nrevisions to a number of components.<\/em><\/strong>  Consumption\nand investment were a little lower, the trade deficit a touch wider and\ninventories were somewhat higher. \nInflation was even slower than initially thought.  None of the changes should alter economists\u2019\nview of first quarter growth, which is already muddled by the coronavirus.   <\/em><\/strong><\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  It is\nhard to look at the current economic data and assume the past is prologue.\nLet\u2019s face it, the coronavirus is the economic story and the way it plays out\nwill determine if the U.S. economy continues its record expansion or comes to a\ncrashing halt.  The potential for a\nrecession, though, depends upon the strength of the economy going into a\npossible coronavirus outbreak and the extent of any outbreak in this country.<\/em><\/strong>  Right now, economic conditions are solid\nenough to withstand a mild epidemic (if there is such a thing).  But growth is not so strong that if there were a\nmajor outbreak, the economy would keep on ticking.<\/em><\/strong>  The likelihood is that the first quarter\ngrowth will come in somewhere between 1.5% and 2%.  Consumers are still spending and with housing\nhyped by the weather, any slowdown in business investment and exports should be\novercome.<\/p>\n\n\n\n

The impacts of the virus could start showing up with\na vengeance in the second quarter.<\/em><\/strong>  The housing gains, which were driven by\nweather, should unwind.  Exports could be\ncut and the lack of tourism is likely to wreck big-ticket retail and to some\nextent, export services.  Business investment could also be hit quite\nhard.  If the virus worsens through the spring, spending on structures and\nequipment could be brought to a halt.  That would add to the problems in\nthe energy sector. With prices way down, investment plans are already being\nslashed and the lower energy prices go, the greater the cutbacks.  This\nlooks like an insidious virus and you cannot build a wall around the U.S. to\nkeep it out. The best we can do is prepare the health system to handle it and\nwhile that would up health care and government spending, you can forget\nbusiness and consumer spending. We might stay out of a recession if there is\nonly a mild outbreak in the U.S.  If not and it lingers, a recession is\nlikely \u2013 and the Fed would be able to do little to stop it.  <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Orders: -0.2%; Ex-Aircraft: -2.5%; Capital Spending: +1.1%\/ Pending Sales: +5.2%; Over-Year: +5.7%\/ GDP: +2.1% (Unchanged) IN A NUTSHELL:  \u201cOther than housing, there is not a lot of oomph in the economy.\u201d WHAT IT MEANS:  Yes, it is all about Covid-19, but the economic data keep coming in and they provide a picture of … Continue reading January Durable Goods Orders, Pending Home Sales and Revised Fourth Quarter GDP<\/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-1672","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1672","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=1672"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1672\/revisions"}],"predecessor-version":[{"id":1673,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1672\/revisions\/1673"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1672"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1672"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1672"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}