US economy •

US economy grew slowly in fourth quarter

The US economy witnessed a sluggish expansion in the fourth quarter of 2014 than previously thought after it was restrained by a widening trade gap and minimal gain in stockpiles.

According to the US Commerce Department report, the country’s economy expanded at 2.2 percent annual rate during the fourth quarter.

The economic growth, which is measured by the gross domestic product (GDP), was weaker than the initial estimations of 2.6 percent in January.

The lower rate of economic growth has marked a significant slowdown from the third quarter, when the strongest growth was witnessed in 11 years.

The median forecast of 83 economists showed a two percent annual growth pace of the American economy.

The consumer spending surged by the most in four years during last quarter as it underlined the underlying strength of the expanding economy of the country.

An improving labor market of the country as well as cheaper fuel costs is believed to be helping in underpinning the households this year. This is expected to assist the country in overcoming a slowdown witnessed in its exports sector.

“The economy is still chugging along pretty nicely. We’re seeing better job growth, the decline in gas prices is really going to be beneficial for consumers and small businesses, and that should help the pace of growth to pick up,” said chief economist Scott Brown, from Raymond James & Associates in Florida.

The market analysts also hold trade responsible for weighing more heavily on growth compared to initial estimates. They said trade contributed to the subtraction of 1.2 percentage points amid stronger growth in imports.

Wall Street stocks tumble after weaker growth in Q4

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The month of February turned to be stronger month for the US stocks, but it ended in modest fashion.

The US economy grew at the annual pace of 2.2 percent in the fourth quarter, according to the US Commerce Department. The expansion of economic activity was sluggish in the fourth quarter of 2014 as it was restrained by a widening trade gap and smaller gain in stockpiles.

Major stock indexes were lower on Friday at the closing trade as they capped a week of subdued trading that continued delivering a couple of new highs for both Standard & Poor’s 500 index and Dow Jones industrial average. The Nasdaq composite was also brought within outstanding distance of its 2000 high in March.

The Nasdaq witnessed the largest monthly gain at 7.1 percent, while the S&P 500 saw 5.5 percent gain that marked its best monthly hike since October 2011, and a turnaround from its drop of 3.1 percent recorded in January. The Dow Jones industrial average increased 5.6 percent for the month.

TD Ameritrade’s chief strategist JJ Kinahan, said, “It’s a wait-and-see attitude. Many people are trying to figure out what to do, taking some profits when they can. We saw that over the past couple of days with tech stocks.”

The S&P 500 slipped 6.24 points, or 0.3 percent, to 2,104.50, while the Dow ended down 81.72 points, or 0.5 percent, to 18,132.70. The S&P 500 index slipped 0.5 from a high of 2,115.48 on Tuesday and Dow was 0.5 percent below its latest high of 18,224.57 on Wednesday.

The Nasdaq, on the other hand, dropped 24.36 points, or 0.5 percent, to 4,963.53. The index has inched closer to crossing the 5,000-point mark.

The three main stock indexes of the United States are all up for the current year.

The current bull market, which is now in its sixth year, turned stronger after being boosted by healthy growth in corporate earnings and low rates of interest, which make stocks more attractive relative to bonds.

The improving consumer confidence and strong growth in the jobs front also encouraged traders, despite indications of sluggishness in Europe and elsewhere.

US consumer confidence plunges to 96.4 in February

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The consumer confidence in the United States tumbled beyond expectations in the month of February as the initial elation over a decline in the prices of fuel faded and the Americans became less positive about the prospects for income and jobs.

According to the Conference Board report, its sentiment index dropped to 96.4 from a revised reading of 103.8 in January, the highest level since August 2007.

The median forecast of 80 economists in news agency survey called for a drop in consumer confidence to 99.5.

A latest price rise in gasoline from a six-year low is likely checking the enthusiasm of several households after a fall in prices in 2014 and a pickup in job hiring also contributed in building the consumer confidence.

The consumer expectations index for the coming six months dropped to 87.2 from January’s 97 reading. The 9.8-point decline was the biggest since the US government shutdown in October 2013.

Lynn Franco, Conference Board director of economic indicators, in a statement said, “Despite this month’s decrease, consumers remain confident that the economy will continue to expand at the current pace in the months ahead.”

The economists and the Federal Reserve Bank have noted that the faster growth in wage has remained a missing piece of the current expansion program. According to the board, the income expectations dropped back in the month of February after increasing in January.

The survey showed 15.1 percent of households in February expected the surge in their incomes in the coming six months, against 19.5 percent saying that last month. Another 12.0 percent of the participating households believe their incomes will decrease in the next six months as compared to January’s response rate of 10.8 percent.

US existing home sales drop 4.9 percent to hit nine-month low in January

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The sales of existing homes in the United States dropped sharply in January to the lowest level in nine months after getting hit by the shortage of properties on the market.

The poor existing home sales report could devastate the expectations for an accelerated growth in the housing activity in the country this year.

The report of National Association of Realtors, which was released on Monday, showed the existing home sales tumbled 4.9 percent to an annual rate of 4.82 million units. The figure recorded for January is the lowest level since April 2014.

The sales pace of December was revised up to 5.07 million units from the earlier reported 5.04 million units. However, the revisions to sales data moving back to 2012 were minimal. Last month, the sales dropped despite a slump in mortgage rates that witnessed the 30-year rate hitting a low of 20 months.

The tighter inventories are severely affecting the sales by restricting the selection of houses that are available in the market for the potential buyers. Moreover, the dearth of supply has also kept the house prices elevated, extending a helping hand to sideline the first-time buyers from the housing market.

Several economists had made forecast that the existing home sales in the United States would drop only to a 4.97-million unit pace in January. The sales gained 3.2 percent from a year ago.

In January, the inventory of homes on the market that were not sold dropped 0.5 percent to 1.87 million from last year.

According to the economists, the inadequate equity and the uncertainty about the strengths of the American economy were the major drivers that have forced the potential sellers to stay in their homes.

US factory production edges up 0.2 percent in January

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The factory production in the United States climbed up in January as the manufacturers cranked out more clothing, computers, steel and other metals, while offsetting the drop in autos and aerospace.

On Wednesday, the Federal Reserve said that the country’s factory production rose 0.2 percent last month, after recording a flat reading in December 2014.

The data suggests manufacturing is still backing the growth of economy, even though it is weaker than one recorded in 2014.

On the job front, a strong hiring provided Americans with more money for spending. This has encouraged the demand for electronics, autos and other manufactured goods. Simultaneously, weak economic growth in other parts of the world has brought down the factories’ exports in the United States.

The overall industrial production, which comprises of mining and utilities, rose 0.2 percent in January after declining 0.3 percent in December. The utility output increased 2.3 percent as heating demand surged. On the other hand, the mining production dropped one percent due to a big drop in oil and gas drilling.

The prices of oil have dropped by nearly half since last summer. That has forced the drilling firms to hold off on digging the new wells and has restricted extraction of oil and gas, which is included in mining output.

The higher American consumer spending is hardly offsetting the adverse impact of weakness overseas. The spending grew in the last three months of 2014, the fastest ever in nine years.

US builder confidence plunges to four-month low in February

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The builder confidence in the United States for the newly-built, single-family homes dropped in the month of February, resulting into a four-month low, because of the harsh weather conditions prevailing in the country.

The new trends were shown in a leading industry report by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which was released on Tuesday.

According to the report, the builder sentiment index dropped two points to 55 in February. This is the lowest level in the builder sentiment index recorded since October last year.

Any reading which reflects more than 50 indicate that large number of builders view sales conditions as positive rather than being negative or poor.

Releasing a statement, NAHB Chairman Tom Woods said, “Overall, builder sentiment remains fairly solid, with this slight downturn largely attributable to the unusually high snow levels across much of the nation.”

David Crowe, chief economist of NAHB, said, “For the past eight months, confidence levels held in the mid-to upper 50s range, which is consistent with a modest ongoing recovery.”

Crowe added that the country’s housing market will remain of the track of improvement in the next year. He believes the housing sector is likely to get a boost from “the optimistic job growth, historically low mortgage rates and affordable home prices.”

The HMI index that gauged view on the current conditions of sales declined single point to 61 in February, while the component that measured traffic of the prospective buyers tumbled five points to 39. On the other hand, the component that gauged sales expectations for the coming six months held steady at 60.

US consumer sentiment drops from 11-year high

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The consumer sentiment in the United States dropped unexpectedly in the month of February from an 11-year high amid concerns over the slow pace of economic growth, indicating that a current weakness in spending might last for a while.

The recede in sentiment came despite strong job gains over the last three months, signaling towards in fastening wage growth and lower prices of gasoline, factors that the economists had hoped to be the major drivers of consumer spending in the coming months.

Jennifer Lee, a senior economist with BMO Capital Markets, “As it stands, the pullback in confidence, along with the early-year decline in retail sales, hints of slower consumer spending growth in the first quarter.”

On Friday, the University of Michigan reported that its consumer sentiment index tumbled to 93.6 in early February from 98.1, reading recorded in January. The decline could signal an increase in prices of petrol early this month.

Despite the drop, the University of Michigan index remained at its second highest level since January 2007.

The consumer spending, which accounts for over two-thirds of the economic activity of the country, got weaker both in December and January. The figures have surprised the analysts who had hoped that the cheaper prices of petrol and a relatively robust labor market would unleash a wave of flexible spending.

The financial markets of the country were slightly moved by the consumer spending data. The households in early February were less upbeat about the prevailing economic conditions and the outlook over the coming six months.

US consumer spending surges barely, retail sales drop 0.8% in January

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The consumer spending in the United States barely increased in the month of January as households slashed back on buying a range of goods, indicating that the country’s economy began the first quarter on a softer note.

The US Commerce Department on Thursday said that the retail sales exclusive of gasoline, automobiles, building materials and food services rose 0.1 percent in January after a 0.3 percent decline in December last year.

The so-called core sales of retails correspond most nearly to the consumer spending component of gross domestic product (GDP).

Millan Mulraine, deputy chief economist at New York-based TD Securities, said, “Overall, the tone of this report was discouraging as it underlines a weak start to the spending activity in 2015 in spite of the remarkable boost to disposable income from lower gasoline prices.”

The analysts had made forecasts of core retail sales to rise 0.4 percent in January. The soft reading could witness the trimming of forecasts by the economists for the first-quarter GDP growth.

The country’s economy grew at an annual pace of 2.6 percent in the fourth quarter. The trade data as well as inventory for the month of December indicate growth could be revised to as minimal as a 1.7 percent rate.

The financial markets in the United States were slightly moved by the data with main attention mainly focused on details of an agreement of ceasefire struck between Ukraine and Russia as well as a surprise cut in the interest rate and the bond purchasing program by the central bank of Sweden.

Despite a 39.5 percent drop in the prices of gasoline since June 2014, the consumer spending has remained soft in the past two months.

According to the economists, the households are using the additional income to clear the debt as well as boost savings.

Spurring growth top agenda at G20 meet; US to talk tough to Europe

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As the big economies are running at different paces with their diverging monetary policies, the Finance ministers and the central bank heads of Group of 20 nations will be facing a stringent task of coordinating their actions for spurring the global growth at the crucial G20 meetings this week in Istanbul.

Among the issues that are expected to top the agenda during the meeting of the Group of 20 leading economies include the rising concern over the United States’ ability to sustain its economy amidst the global slowdown.

The meeting, which is scheduled for Monday and Tuesday, comes at a time when severe economic issues have cropped up in the recent times, such as Greece’s casting a shadow over Europe, a strengthening dollar which threatens other emerging economies and cheap crude oil playing havoc with inflation and growth forecasts.

In a blog post on Friday, IMF Managing Director Christine Lagarde said, “Without action, there is a lot at stake. We could see the global economic supertanker continuing to be stuck in the shallow waters of sub-par growth and meager job creation.”

Last week, US Treasury Secretary Jack Lew said that the country could not act as “the sole engine of growth” for the global economy. Taking tougher stance over the prevailing condition of Euro Zone, a senior US official said the clear message of Washington would be to make Europe realize that it is not doing enough.

According to Turkey’s Deputy Prime Minister Ali Babacan, handling sluggish growth in the world and giving low income or developing countries more teeth will be among the priorities for his country.

Last week, Canadian Finance Minister Joe Oliver expressed concern over the stalled euro zone, slowdowns in major Asian players– India and China–, Ukraine geopolitical crises and the unrest in Iraq and Syria.

“Kick-starting global growth will be front and center at the G20 meetings. Though America is carrying the world economy at the moment, that is simply not sustainable,” Oliver said.

Germany is expected to argue over its rising domestic demands and the plans to raise the public spending, as per the European sources familiar with the country’s agendas for G20.

US consumer spending weakest at 0.3 percent since 2009 in December

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The consumer spending in the United States witnessed its biggest fall since late 2009 in December as the households managed to save the extra cash due to the declining prices of gasoline.

According to the Commerce Department report, the consumer spending dropped 0.3 percent after gaining 0.3 percent in October and 0.5 percent in November last year.

The consumer spending accounts for over two-thirds of economic activity of the United States.

Ryan Sweet, Moody’s Analytics’ senior economist, said, “The consumer is poised to do well in early 2015. Lower gasoline prices are going to provide a big lift to consumption.”

The drop in the consumer spending, which is the largest since September 2009, indicated a falling trend in spending at service stations amid tumbling gasoline prices, softness in demand for utilities over weather issues and weak auto receipts.

Another data, released on Monday, showed that the country’s factory activity cooled in the month of January, indicating that the economy may have welcomed the new year on a slightly softer note against the expectations.

Meanwhile, the analysts said that the upbeat and cash-flush consumers are likely to bring spending on track and buoy the economy in 2015.

The spending data was incorporated in the fourth-quarter gross domestic product report released on Friday. The consumer data showed the economy growing at an annual pace of 2.6 percent, with the consumer spending increasing at a brisk rate of 4.3 percent, which is the fastest since 2006.

According to the economists, the fourth-quarter GDP growth is expected to be revised at the rate of at least 2.8 percent after another report by the Commerce Department on Tuesday suggested stronger non-residential construction spending in the month of December than earlier expected.

The economists have estimated the consumer spending for the first quarter ranging between four and five percent rate.

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