Gross Domestic Product (GDP)
The Bureau of Economic Analysis (BEA) released its advanced estimate of fourth quarter 2010 Gross Domestic Product (GDP). Real GDP growth accelerated in the fourth quarter to an annual rate of 3.2 percent, following growth of 2.6% in the third quarter. Consumer spending, investment and trade were the strongest contributors to growth. Personal consumption expenditures increased at a 4.4% annual rate in the fourth quarter. Business investment remained strong but the rate of growth is slowing, as expected. The trade deficit shrank by $112.8 billion, due to strong export growth and a sharp downturn in imports. We expect the momentum from this latest report to carry into 2011 with growth around 4 percent by the end of the year.

New Home Sales
New home sales increased by 17.5% in December to a seasonally adjusted annual rate of 329,000 from 280,000 in November. Over the year sales are down 7.6%
The inventory of unsold homes declined 2.5% in December to 190,000. At the current sales rate the months’ supply is 6.9, down from 8.4 in December. Median home prices increased 12.1% to $241,500 in December from $215,200 in November. Over the year prices are up 8.5%. Despite a strong showing in December, the housing market has vacillated wildly in the past few months and we expect only modest gains this year.

Consumer Confidence
The Conference Board index of consumer confidence rose in January after declining slightly in December. Consumer confidence jumped to 60.6 from 53.3 (revised from 52.5) in November. Consumer confidence has reached its highest level since May 2010. The gains were widespread across the different component questions. January’s increase was driven by improvements in the assessment of business and labor market conditions. The expectations component rose to 80.3 from 72.3. The present situation component rose to 31.0 from 24.9. While January’s improvements were positive, confidence and spending remain weak.

Durable Goods
New orders for durable goods decreased 2.5% in December, following decreases in the previous two months. Transportation equipment orders lead the decline with a 12.8% decrease. The data is very sensitive to large orders, such as for aircraft, which declined by almost 352%. Nondefense capital goods orders excluding aircraft rose 1.4% in December, following November’s gain of 3.2%. Shipments increased 1.4 %. Inventories rose 0.7%, the twelfth straight increase. Unfilled orders fell 0.4%, which was the first such decline in eight months. Despite the continued declines in the headline numbers, new orders are showing an underlying strength that is pointing to continued growth in business investment.