- Advance 4Q Personal Consumption rose 1.1% versus estimates of a .4% increase and a 4.1% rise in 3Q.
- Advance 4Q GDP Price Index rose 3.0% versus estimates of a 2.7% gain and a 3.3% rise in 3Q.
- New Home Sales for December rose to 1269K versus estimates of 1225K and 1233K in November.
BOTTOM LINE: The US economy grew at a slower-than-expected 1.1% pace in the fourth quarter as consumers spent less and corporations limited equipment purchases, Bloomberg reported. This snapped the string of 10 straight quarters exceeding 3% growth, the best stretch since 1986. A drop in October car sales weighed on consumer spending during the quarter. The US economy expanded 3.5% for all of 2005, above the long-term average of 3.1% growth. Government spending declined last quarter at a 2.4% annual rate, the biggest drop in 5 years. The core pce, the Fed’s favorite inflation measure, rose 2.2% during the quarter. GDP was weighed down in the fourth quarter by the effects of the hurricanes. I expect GDP to bounce back above 3% this quarter as hurricane rebuilding takes hold, corporate spending accelerates, the job market remains healthy, housing improves, consumer spending bounces back and the Fed stops raising interest rates.
Sales of new US homes unexpectedly increased in December, capping a fifth straight record year for the industry and suggesting job and income growth are keeping the housing market from withering, Bloomberg reported. The median selling price was $221,800, down 3.4% from a year earlier. The supply of new homes on the market remained at 4.9 months’ worth. For the year, the median price of a new home rose 7.4% to $237,300. I expect home sales to continue to improve in January as overall growth slows to more healthy sustainable levels.