By Jennifer Yousfi
It was another troubling week for the U.S. market, as the latest round of economic indicators continued to paint a downbeat portrait of the outlook for the American economy.
Let's take a look at the economic reports released last week:
- Existing Home Sales: The week got off to a bad start on Sunday, when The National Association of Realtors announced existing home sales for January [including single-family, town homes, condominiums and co-ops] declined to 4.89 million units from 4.91 million units in December, a seasonally adjusted decrease of 0.4%. Even more troubling: January's sales represented a 23.4% decline from the 6.44 million units sold in January 2007. It appears as if housing sales are still locked in a downward trend.
- Producer Price Index: On Tuesday, the Bureau of Labor Statistics announced the producer price index (PPI) for finished goods increased a seasonally adjusted 1.0% in January. The increase was due in large part to an increase in fuel-related prices, which isn't surprising since oil briefly topped $102 a barrel this week.
- Consumer Confidence: The Conference Board announced the Consumer Confidence Index declined 12 points in February. The Index now stands at 75.0 [from it's 1985 base rate of 100], down from 87.3 in January. Lynn Franco, director of The Conference Board Consumer Research Center, summed it by observing that "with so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase."
- Durable Goods Orders: On Wednesday, the Census Bureau announced that new orders for manufactured durable goods totaled $212.8 billion, a decline of $12 billion, or 5.3%. That means consumers are holding off on big-ticket purchases – such as appliances and furniture – until they feel more confident about the economy.
- New Home Sales: Also on Wednesday, in a joint news release, the Census Bureau and Department of Housing and Urban Development announced new single-family home sales for January were a seasonally adjusted 588,000, a decline of 2.8% from the 605,000 recorded for December. While that was only a modest decline from the month before, January's sales were down a hefty 33.9% from January 2007's total of 890,000. Even worse, new home sales experienced an even bigger decline than sales of already existing homes.
- Initial Jobless Claims: For the week ending Feb. 23, the Department of Labor announced the advance figure for seasonally adjusted initial unemployment claims was 373,000, an increase of 19,000 from the previous week's revised figure of 354,000. The 4-week moving average, which is a more stable measure of jobless claims, was 360,500, a decrease of 1,250 from the previous week's revised average of 361,750. While that's only a slight decrease in the four-week moving average, with such a broad array of negative economics, even marginally upbeat news has to be viewed as a positive.
- Preliminary Gross Domestic Product: On Thursday, the Commerce Board announced that the preliminary gross domestic product (GDP) figure for the 2007 fourth quarter was 0.6%, unchanged from the advance figure released last month. Analysts had expected a slight upward revision to 0.7%. When that didn't happen, the U.S. stock market hit the skids in a sell-off that carried over into Friday, when the Dow Jones Industrial Average dove more than 315 points. [For an in-depth look at Friday's trading activity and stock-market performance in today's issue of Money Morning, please click here.]
- Personal Income/Outlays: To wrap up an already disappointing week, the Bureau of Economic Analysis announced Friday that personal income increased $32.2 billion, or 0.3%. Personal consumption expenditures (PCE) increased $39.9 billion, or 0.4%. But don't be fooled by this seemingly good news. Higher prices due to inflation were responsible for the increase in consumer spending.
The outlook for the U.S. economy continues to be uncertain, but recessionary fears continue to escalate. While the market isn't technically in a recession until the GDP registers a decline for two consecutive quarters, the odds of a significant slowdown continue to increase. There's still one more fourth quarter GDP reading to come, the so-called "final" estimate. But without any change between the advance and preliminary estimates, don't expect a surprise there. And analyst estimates are pointing to a 0.0% change in GDP for the first quarter of the New Year.
News and Related Story Links:
- Money Morning:
Growth – Not Inflation – Remains the Fed's Main Concern
- Money Morning:
Home Prices Fall Record Rate in 2007