Durable Goods Orders Fall, Consumer Confidence Jumps to Cycle Highs, Existing Home Sales Surge

- Durable Goods Orders for January fell -7.8% versus estimates of a -3.0% decline and a 2.8% rise in December.
- Durables Ex Transports for January fell -3.1% versus estimates of a -.2% decline and a 2.6% increase in December.
- Consumer Confidence for February rose to 112.5 versus estimates of 108.5 and 110.2 in January.
- Existing Home Sales for January rose to 6.46M versus estimates of 6.24M and an upwardly revised 6.27M in December.

BOTTOM LINE: Orders placed with US factories for durable goods fell more than forecast in January, Bloomberg reported. Orders for non-defense capital goods excluding aircraft, a proxy for future business investment, fell 6%, the biggest decline since January 2004. I continue to believe manufacturing activity will improve from current levels as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories.

Confidence among US consumers unexpectedly rose to the highest in more than five years this month, lifted by rising wages and an expanding job market, Bloomberg said. The percentage of people who said jobs are hard to get declined to the lowest since August 2001. The Present Situation component of the index surged to 139.0 from 133.9 the prior month. The Expectations component rose to 94.8 versus 94.4 in December. The percentage of those saying jobs are hard to get fell to 17.5% in January versus 19.7% in December. Wages rose 4% in January, near the strongest in six years. As well, gas prices are down to $2.30/gallon from $3.03/gallon in August of last year. The S&P 500 has risen 18.2% in just over eight months. I expect the Univ. of Mich. Consumer Confidence reading to join this one in making cycle highs before year-end as gas prices fall further, stocks rise more, interest rates remain low, housing stabilizes at relatively high levels, inflation decelerates further and the job market remains healthy.

Sales of previously owned homes in the US rose more than forecast in January to a seven-month high as lower prices and warm weather brought out more buyers, Bloomberg said. The report suggests that housing may be less of a drag on growth this year, according to economists. The Case-Schiller Home Price Index showed the average home has increased in price by .5% over the last 12 months. I continue to believe that housing is in the process of stabilizing at relatively high levels.