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Weekly Economic Vital Signs - Nothing Matters But The Virus Now


  • This is a weekly series focused on analyzing the previous week’s economic data releases.
  • The objective is to concentrate on leading indicators of economic activity to determine whether the economy is strengthening or weakening, and the rate of inflation is increasing or decreasing.
  • This week we examine new home sales, durable goods orders, the second estimate for Q4 GDP and personal income and spending.
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New Homes Sales

New home sales continue to be a bright spot for the US economy, as sales in January soared to an annualized 764,000 homes, which is up 7.9% from the prior month and 18.6% over the past year. The median sales price has risen 14% over the past year to 348,000, and there is a 5.1-month supply based on the current sales pace. I suspect that the recent plunge in 10-year Treasury yields, which may drive mortgage rates to record lows, will be enough stimulus to keep this party going.

Durable Goods Orders

Durable goods orders rebounded in January from two dismal months, declining just 0.2%, but when we exclude transportation orders, the number improves to an increase of 0.9%. This improvement may be short-lived when we see the full impact of the coronavirus on business supply chains in the coming month.

Orders for nondefense capital goods excluding aircraft, otherwise known as capital spending, rose 1.1%. The shipment of these goods used to compute GDP also rose 1.1% in January, which ends a string of negative months. That will be a positive contributor to Q1 growth. Again, this improvement is likely to be short-lived, as the deceleration in the rate of economic growth picks up.


There were no meaningful changes in the second estimate for the rate of economic growth in the fourth quarter of last year. It remained at 2.1%. Consumer spending growth was revised modestly lower from 1.8% to 1.7%, as was business investment. Inventories and net exports were revised modestly higher. The core rate of growth, which excludes inventories, net exports and government spending, rose a very weak 1.3%. That is down from an average of 2.5% over the past two years.

Personal Income And Spending

Personal income was up a better-than-expected 0.6% in

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This article was written by

Lawrence Fuller profile picture

Lawrence Fuller has been managing portfolios for individual investors for 30 years, starting his career at Merrill Lynch in 1993 and working in the same capacity with several other Wall Street firms before realizing his long-term goal of complete independence when he founded Fuller Asset Management.

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Comments (18)

sts66 profile picture
Boy, did that rate cut backfire - initially sent the DOW up 400 pts, then it crashed to 26k, a total swing of 1000+ pts, most of it negative - now down -750 pts from yesterday's close. The Fed shot their load for nothing - why the hell they thought is would help is beyond me - oh yeah, forgot - it wasn't their idea, it was Bozo's demand.
Italy, Germany, China, Japan, Australia - and yes, USA - will contract. Not all businesses will hurt equally but all will feel pain. eCommerce will further expand. Will it last 6 months (= recession)? Who knows? Quite possibly.
sts66 profile picture
Do you really mean you foresee a Recessions, not that the market continues to correct until it's down -20%? Two huge differences, market was way overvalued, S&P500 PR was way above historical norms. A correction I wouldn't mind, the market needed it - a recession, then retirees are in big trouble.
Maga infinity profile picture
@sts66 I don't think Fed care about the retirees as long as the 1% have no recessions.
sts66 profile picture
Not sure it's correct to say "The Fed" doesn't care about the market and retirees, but it's clear the red headed baboon in charge doesn't give a damn.
Lawrence Fuller profile picture
@sts66 The economy has become the market, in that we are dependent on the wealth effect (top 10% I'd say) to spend and keep growth at 2%. A bear market decline that is not immediately recovered (like last 2018, which was 19%) will hurt sentiment. It will weigh on consumer spending. The economy was already slowing as it naturally does after a decade of expansion. The debt burden will start to show its ugly side as revenue slides with growth - that's the elephant in the room no one is talking about.
The market is probably betting on central banks coming to the rescue. I agree that recession is probably inevitable, but probably moot as far as the market is concerned. We will soon see if central banks are truly omnipotent for keeping asset prices inflated.
Lawrence Fuller profile picture
rate cuts and liquidity won't cure the virus, and the impact from an economic standpoint will take weeks to months to feel. I think a rate cut with rates this low speaks of desperation.
Maga infinity profile picture
@Lawrence Fuller virus and stock are two different things. Fed printing is not intended to cure the virus; rather it's to pump the market.
Lawrence Fuller profile picture
@MAGA2020 Agreed, but the focus should be on preparing for and containing the virus, not rate cuts to keep the market from correcting. That's what is pissing me off. Calling for rate cuts as a cure to economic woes that WILL result from the virus is treating symptoms and not the disease.
Aren't new home sales in winter affected by weather? We had a warmer Jan thus sales were higher.
02 Mar. 2020
....our economy is very dependent on our financial markets...

Our real economy is based on people spending money. Much of that is in face-to-face transactions

Time to figure out what will remain when there is a credible threat of serious illness to you or people you care about if you come in contact with an ill person.
Maga infinity profile picture
Is this the best you can do after one week of drop?
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