Durable Goods Orders Too Soon to Declare Soft 2012:Q1. Chart 1

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Durable Goods Orders Too Soon to Declare Soft :Q1 February 28, Asha G. Bangalore agb3@ntrs.com Orders of dur able goods f ell 4.% i n January f ollowing s trong gains i n N ovember (+4.

1 Durable Goods Orders Too Soon to Declare Soft :Q1 February 28, Asha G. Bangalore Orders of dur able goods f ell 4.% i n January f ollowing s trong gains i n N ovember (+4.2%) and December (+3.2%). A decline in bookings of commercial aircraft (-19%) and machinery (-.4%) brought down the headline. Defense orders moved up 17.7% to provide a partial offset. Excluding defense and aircraft, orders of capital goods dropped 4.5% i n January. O rders of dur able g oods t end t o de cline i n January, pa rtly du e t o weakness i n aircraft or ders. T hat s aid, the year-to-year gain i n or ders of non -defense capital goods excluding aircraft shows a small acceleration in January, while shipments show a flat trend in the last three months (see Chart 1). Inventories of durable goods rose.7% i n January after. 3% i ncrease i n D ecember. T he ne t i mpact of i nventories a nd shipments f or the f irst q uarter r eal G DP es timate i s unc lear and one m onth s da ta ar e inadequate to change our current forecast of 2.4% increase in first quarter real GDP. Chart 1 Mfrs' New Orders: Nondefense Capital Goods ex Aircraft % Change - Year to Year NSA, Mil.$ Mfrs' Shipments: Nondefense Capital Goods ex Aircraft % Change - Year to Year NSA, Mil.$ Sources: Census Bureau /Haver Analytics -

2 DURABLE GOODS ORDERS - % CHANGE M-M NON-DEFENSE CAPITAL NON-DEFENSE CAPITAL COMPUTERS AND DATE TOTAL DEFENSE GOODS GOODS EX-AIRCRAFT ELECTRONIC PRODUCTS Aug Sep Oct Nov Dec Jan DURABLE GOODS SHIPMENTS- % CHANGE M-M NON-DEFENSE CAPITAL NON-DEFENSE CAPITAL COMPUTERS AND DATE TOTAL CAPITAL GOODS GOODS EX-AIRCRAFT ELECTRONIC PRODUCTS Aug Sep Oct Nov Dec Jan Home Prices Continue to Maintain Downward Trend The Case-Shiller Home Price Index (HPI) slipped.5% in December on a seasonally adjusted basis. The level of the index is the lowest since January 3 (see Chart 2). Of the metro areas, Phoenix (+1.5%), Miami (+.2%), Tampa (+.2%), Dallas (+.2%), Portland (+.1%), Denver ( +.1%), a nd C harlotte ( +.1%) recorded increases o f v arying si zes i n December. Among the other metro areas that showed decreases in home prices, the largest declines were in Detroit ( -3.5%), A tlanta ( -1.3%) a nd C hicago ( -1.1%), w hile S an F rancisco w as t he on ly metro area to show a nearly steady reading. 2

3 Chart 2 2 S&P/Case-Shiller Home Price Index: Composite SA, Jan-= Source: S&P, Fiserv, and MacroMarkets LLC /Haver Analytics On a comparative basis, the message from the National Association of Realtors, CoreLogic, Case- Shiller, a nd F HFA home price index i s that de clines i n home pr ices ha ve no t s topped a nd the magnitude is not significantly smaller than a year ago for three of the four house price measures (see Chart 3). Thus, the pricing situation in the housing sector continues to remain problematic. 3

4 Chart 3 Case-Shiller Home Price Index, yoy percent change, NSA Median Price of Single-Family Home, yoy percent change, NSA CoreLogic National House Price Index: Month Change (NSA, %) FHFA House Price Index, yoy percent change, NSA Sources: SP/FI/MM, NAR, CORELOG, FHFA /Haver -7.5 Recent Uptick in U.S. Consumer Optimism is Related to Gains in Jobs The Conference Board s Consumer Confidence Index rose in February to 7.8 from 61.5 in January, w ith t he E xpectations I ndex ( 88. v s in January) m aking t he l arge c ontribution compared with the improvement of the Present Situation Index (45. vs i n January). T he University of Michigan C onsumer S entiment Index a lso conveys a n i mprovement in c onsumer outlook. The percentage of respondents indicating jobs are hard to get (38.7 vs in January) fell and the percent noting that jobs are plentiful (6.6 vs. 6.2 i n January) moved up t o make the make the net of these two indexes smaller in February compared with the prior month. The net of these two indexes has a positive correlation with the unemployment rate (see Chart 5); based on this r elationship, the latest de cline o f this labor m arket m easure ( 32.1 in February v s i n January) points to a likely drop in the unemployment rate in February. The jobless rate in January was 8.3%, the February employment report will be published on March 9. 4

5 Chart 4 Consumer Confidence (SA, 1985=) Consumer Confidence: Expectations (SA, 1985=) University of Michigan: Consumer Sentiment (NSA, Q1-66=) Sources: The Conference Board, University of Michigan /Haver Analytics Chart 5 'Jobs-Hard-to-Get' Less 'Jobs-Plentiful' 6 r =.95 Civilian Unemployment Rate: 16 yr + SA, % Source: Haver Analytics

Minutes of August 9 FOMC Meeting Debate Indicates Fed is Inclined to Ease, if Necessary

Asha G. Bangalore agb3@ntrs.com Minutes of August 9 FOMC Meeting Debate Indicates Fed is Inclined to Ease, if Necessary August 3, 211 The minutes of the August 9 FOMC meeting reveal a range of opinions