Wall Street Strategies
Hello! Sign in or Register


Econ Wrap-Up: GDP, Chicago PMI, Consumer Sentiment, Pending Home Sales

2/27/2015
By Jennifer Coombs

The Bureau of Economic Analysis (BEA) downwardly revised its original Q4-2014 US gross domestic product (GDP) growth estimate to 2.2% from an earlier estimate of 2.6%. The equity markets were unmoved by this and proceeded to open in the red as this reading is far lower than the impressive 5.0% growth observed in Q3-2014. Nonresidential fixed investment increased more than originally estimated while private inventory investment increased less than measured last month. One highlight from the report is that consumer contributions were still strong as personal consumption expenditures rose 4.2% in the quarter, significantly higher than the 3.2% increase observed in the previous quarter.

 

 

Aside from the GDP reading, there was even more mixed data leading to an ambiguous-colored market. Firstly, the purchasing managers index (PMI) in the Chicago area noted some very disappointing manufacturing activity for the month of February. The Chicago PMI plunged by 13.6 in the month to a sub-50 level of 45.8 for the lowest reading since July 2009. Ultimately, the report attributes the massive drop to bad weather and residual effects from the West Coast port slowdown over the last month. New orders, production and employment all posted double-digit declines in February. Supplier deliveries slowed for the month as well, which is normally a sign of economic strength, but once again this is tied to delivery delays related to the port shutdown. The Chicago report actually covers both the manufacturing and non-manufacturing sectors, which makes the index more volatile than the Fed manufacturing reports. We will chalk this one up to an outlier since other data is pointing to moderate growth for the month.

 

 

There continues to be mixed signals among the American consumer as the Conference Board reported lower confidence in February while the University of Michigan noted that sentiment improved in the month. In the last two weeks of February, the final consumer sentiment index reading improved sharply to a final reading of 95.4, which was up 1.8 point from the mid-month reading. This final reading points to a pace of 97 in the last two weeks of the month which doesn’t show much slowdown from January’s final reading of 98.1. Oddly enough, the sharpest move to the upside was in the current conditions component which increased to 106.9 from 103.1 in the preliminary reading. This component ultimately points to steady rates of consumer activity for February compared to the month prior. The expectations component increased by 1.5 points from the mid-month reading to 88.0, meaning that the pace was over the 90-level in the last two weeks of the month. We note that this component heavily relies on the outlooks for employment and income, both of which could surprise us on February’s jobs report next week. Ultimately, February’s reading on the spirit of the US consumer has been in decline before today’s report, which derives most of its strength from the jobs market and so we may be in for a surprise.

 

 

Lastly, the housing market got another check in the positive column this week with the January pending home sales report. For the month, pending home sales increased by 1.7% to an index reading of 104.2, a substantial improvement over the upwardly revised December reading of 102.5 (from 100.7). When broken down by region, the two largest regions showed the greatest strength. The South increased by 3.2% and the West at 2.2% month-over-month. For the other two, the Midwest region declined slightly by 0.7% in January, while the Northeast region remained relatively unchanged at 0.1%. This data ultimately rounds out a week of mixed housing data, but points to a potentially strong spring selling season.

 

Jennifer Coombs
Wall Street Strategies

More Articles by Jennifer Coombs


 

Add a Comment!

Name:
Email:
Comment:
 
 
Submitted comments are subject to moderation before posting.


Home | Products & Services | Education | In The Media | Help | About Us |
Disclaimer | Privacy Policy | Terms of Use |
All Rights Reserved.