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Consumer spending flatlines, savings ramp up

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WASHINGTON (3/3/15)--Consumer spending nationwide fell 0.2% in January after a 0.3% drop in December, according to numbers released Monday by the Bureau of Economic Analysis. The silver lining, perhaps, is that the saving rate climbed to 5.5%, doubling down on December's 0.5% rise ( March 2).

While overall spending declined, real spending jumped 0.3% after a 0.1% step back in December thanks to upswings in service, utility and goods spending.

"Real spending growth accelerated in January as utility spending rebounded and consumers continued to benefit from low energy prices," said Scott Hoyt, Moody's analyst ( ). "Discounting the weather effect, spending grew, though only modestly. Despite the weakness, however, the trend is positive."

Personal income growth remained steady with a 0.3% increase, while wage income growth accelerated to 0.5%.

Consumer prices fell 0.5%, which is the biggest drop since November 2008 and the fourth-largest decline on record, according to Moody's.

Energy prices fell 10.4%, and food prices dropped 0.2%. Excluding energy and food, core prices climbed 0.1%.

"Despite their recent increases, consumers are spending less on gasoline and other energy goods than they were a year earlier, freeing cash for other purposes," Hoyt said. "This is a drag on nominal spending growth, however."

Pending-home sales highest since Aug. 2013

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WASHINGTON (3/2/15)--Pending-home sales recorded solid gains in January after December's step back, according to the National Association of Realtors (NAR).

On a seasonally adjusted annualized basis, the NAR pending-home sales index climbed 1.7% to 104.2 during the month, putting sales 8.4% ahead of last year's pace ( Feb. 27).

Pending-home sales are a leading indicator for the housing market, and precede changes in existing-home sales by one to two months, said Brent Campbell, Moody's analyst (

"Contract activity is convincingly up compared to a year ago despite comparable inventory levels," said Lawrence Yun, NAR chief economist. "The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth."

Gains were uneven by region, as pending sales climbed in the South and West by 3.2% and 2.2% respectively, while the snow-swept Northeast and Midwest recorded a 0.1% gain and a 0.7% retreat respectively.

On an annual basis, pending-home sales jumped 11.4% in the West, 9.7% in the South, 6.9% in the Northeast and 4.2% in the Midwest.

"All indications point to modest sales gains as we head into the spring buying season," Yun said. "However, the pace will greatly depend on how much upward pressure the impact of low inventory will have on home prices."

Annual inflation drops for 1st time since 2009

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WASHINGTON (2/27/15)--Largely fueled by the price of oil, the consumer price index (CPI) dropped 0.7% in January, the largest monthly step back since November 2008 ( Feb. 26).

On an annual basis, CPI fell 0.1%, the first year-over-year decline since October 2009.

"The good news is that the majority of the weakness is concentrated in energy-related goods and services, as the core index rebounded modestly in January," said Andrew Davis, Moody's analyst ( ). "This is comforting for policymakers, as concerns about disinflation bleeding into core prices were heightened after December's soft reading."

The energy index plunged by 9.7% in January, with gasoline prices--the main culprit--plummeting 18.7% from the prior month. Fuel also fell by 9.9%.

Food prices largely remained stable in January after a 0.2% rise in December. "Food at home" prices fell 0.2% with four of the six major grocery store food groups decreasing. "Food away from home" climbed 0.2% after a 0.3% increase the previous month.

Excluding food and energy, core prices climbed 0.2% in January, a slight increase in pace from December.

However, prices for new vehicles, used cars and trucks, and core commodities all fell, offsetting the gains in the core CPI.

Weather puts chill on new-home sales in Northeast

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WASHINGTON (2/26/15)--The overall climate for new-home sales remained steady in January, despite a plummeting month for the Northeast, according to the Commerce Department.
While new single-family home sales ticked downward 0.2% in January to 481,000 annualized units, they still came in above the expected, and much larger, decline of 3.5%, according to Wednesday's numbers.  Compared with January a year prior, sales were up 5.3%.
Figures for December were revised up to 482,000 from an initial estimate of 481,000, making December the strongest month since June 2008 ( The Wall Street Journal Feb. 25).
With colder weather and severe snowstorms in play, new-home sales fell 51.6% in the Northeast. This was the largest monthly decline and put sales in the Northeast at a record low, said Moody's analyst Ryan Sweet ( Feb. 25). The Northeast accounted for 3% of U.S. new-home sales in January, down from 6% in 2014 and the lowest on record. In other regions, sales rose 19.2% in the Midwest and increased 2.2% in the South. Sales in the West fell 0.8%.

News of the Competition (2/25/15)

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  • NEW YORK (2/25/15)-- JPMorgan Chase, the largest bank in the United States, announced plans recently to charge large institutional customers for some deposits, a move driven by new banking rules that increase the cost for banks to hold money for clients ( The Wall Street Journal Feb. 24). According to a recent bank presentation, JPMorgan hopes to shave off $100 billion of non-operating deposits by the end of the year. The change reportedly will target excess cash held by financial institutions, such as hedge funds and foreign banks, but not individual account holders ( Yahoo Feb. 24). JPMorgan and other big banks in the United States recently have been discussing taking steps to discourage certain deposits in response to new regulations and low interest rates, according to The Journal . "We'll reshape the business over time by shrinking certain exposures," Marianne Lake, JPMorgan chief financial officer, told The Journal ...

Conference Board: Consumer confidence dips in Feb.

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WASHINGTON (2/25/15)--Consumer confidence took a step back in February, as the Conference Board Consumer Confidence index slipped by 7.4 points during the month to a reading of 96.4 ( Feb. 24).

The stumble knocked the index well below the 103.8 recorded in January, a seven-year high, according to Moody's.

"More pessimism over the future fueled the majority of the decline, which was more than forecast, but weaker assessments of current conditions also contributed," said Nate Kelley, Moody's analyst ( ). "Still, the index has been choppy over the past six months or so, and the three-month moving average is 97.8, the highest since July 2007."

The present situation subindex dropped by 3.7 points to 110.2 in February, and the future conditions subcomponent fell by nearly 10 points to 87.2.

Fewer shoppers said business conditions were good during the month--26% after 28.2% in January--though the share that said conditions were bad also fell to 17% from 17.3%.

Further, 57% of respondents said business conditions were normal, a slight improvement over last month's reading.

Other key findings from the report:
  • The share of respondents who said jobs are "hard to get" rose by 1.6% to 26.2%, while the share who believe jobs are plentiful inched down to 20.5% from 20.7%;
  • The share of those who believe business conditions will remain unchanged over the next six months climbed to 75.2% from 72.9%, the highest number since July 2007, while the share who believe conditions will improve fell to 16.1% from 18.9%, the smallest number since October 2013; and
  • Plans to buy a home were largely unchanged from January to February, with those planning to buy a home rising to 5.6% from 5.4% for the month. Those who plan to buy a car, however, fell to 11% from 13.1%.

Existing-home sales pace drops to 9-month low in Jan.

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WASHINGTON (2/24/15)--Existing-home sales continue to underwhelm as sales declined again in January--this time falling to their slowest pace in nine months, according to numbers released Monday by the National Association of Realtors.
Seasonally adjusted annualized home sales fell 4.9% to 4.82 million. However, that was still 3.2% above their year-ago levels ( Feb. 23).
Weak condo-and-co-op sales led the decline with its third-straight poor month, dropping 3.5% from December to January, and 1.8% year-over-year. Single-family home sales also fell, dropping 3.5% to 4.27 million units annualized.
"The housing market took a step back in January," said Thomas McCartin, Moody's analyst ( ). "Existing-home sales dropped to the lowest level since April. The current pace is soft" and January's performance did not alter that trend much.
By region, existing-home sales fell 2.7% in the Midwest, 4.6% in the South, 6% in the Northeast and 7.1% in the West.
The median price of existing single-family homes dropped to $199,600 for the month, a 4.1% decrease from December and the lowest average price since March 2014, according to Moody's. The price is 6.2% higher on an annual basis, however.