March 31, 2009—The latest batch of economic data offered some surprising news, as orders for durable goods increased while sales of existing and new homes rose as well. However, Gross Domestic Product growth in the fourth quarter of 2008 was revised downward.

Gross Domestic Product (GDP)
The Bureau of Economic Analysis' revised report shows -6.34% annualized GDP growth in the fourth quarter of 2008, down from -0.5% annualized growth in the third quarter. The largest contributors to the downward revision were falling inventories, lower service exports, and a drop in nonresidential construction. Furthermore, corporate profits fell $250 billion from the third quarter of 2008, the largest decline ever recorded. Compared to the fourth quarter of 2007, real GDP declined 0.8%, the largest year-over-year decline since 1991. With the economy being battered on so many fronts, positive growth may not return until the second half of 2009 or in the first quarters of 2010.

Durable Goods
Durable goods orders surged 3.4% in February following a 7.3% decrease in January. Excluding transportation, orders grew 3.9% over the previous month, including a 6.6% increase in core capital goods fueled by strong orders for machinery goods. Unfilled orders, inventories, and shipments all decreased, at 1.3%, 0.9%, and 0.5%, respectively. February's numbers were better than expected by analysts, however, the data is not consistent with other indicators of the manufacturing sector, such as the ISM survey, industrial production, and capacity utilization, all of which declined or remained flat in February. Manufacturing should bottom out this quarter and improve slowly as the year goes because of tax cuts that take effect April 1 and as projects paid for by the stimulus package take shape.

Existing Home Sales
The National Association of Realtors reported that existing home sales surged 5.1% in February, coming off a January decline of 5.3%. Available inventory remained flat at 9.7 months. The median price for a home rose slightly from $164,800 in January to $165,400 in February. Compared to a year ago, existing home sales are down 4.6%. Low prices should continue to entice hesitant buyers back into the market, as should the homeowner stability and affordability plan included in the economic stimulus package. Moreover, the Treasury Department's announcement that it will purchase toxic debts from financial institutions should foster lending. The housing market remains in turmoil, however, because of the worldwide financial crisis and recession.

New Home Sales
In February, new home sales increased 4.7%, to 337,000 units after declining 13.2% in January. Compared to February 2008, new home sales have plummeted 41.1%. Inventory of new homes inched downward to 12.2 months. While the housing market may be in the beginning phases of a recovery because of help provided by the economic stimulus package and the administration's plan to take toxic assets off banks' books, one should not read into February's numbers with too much optimism, as they are coming off of an extremely low base.