March 6, 2007—The GDP grew 2.2% in the 4th quarter and 3.3% for all of 2006. Sales of existing homes jumped 3.0% in January but new home sales plummeted 16.6%. Personal income gained a surprising 1.0% in January while consumption increased 0.5%. Lastly, the ISM index returned to expansionary territory in February, jumping to 52.3.

Gross Domestic Product
The 'preliminary' estimate by the BEA indicates that the GDP grew 2.2% in the 4th quarter, a slight up-tick from the 2.0% growth in the 3rd quarter. A 10.5% increase in exports during the 4th quarter as well as a 4.2% gain in consumption made positive contributions to the GDP. A drop in imports and strong government spending also helped overall growth. A 19.1% decline in fixed residential investment, a reflection of the weak housing market, served as the biggest drag on GDP growth. For all of 2006, the GDP grew 3.3%. 

Existing Home Sales
Sales of existing homes jumped 3.0% in January to 6.46 million units (seasonally adjusted annual rate). Despite the increase, existing homes sales are down 4.3% on a year-ago basis. The median sale price of existing homes was $210,600 in January, a large 5.0% drop from December. Moreover, the January 2007 sale price is 3.1% lower than the price from last January. Lastly, inventories inched up to 3.55 million units, or 6.6 months of supply.

New Home Sales
New home sales plummeted 16.6% in January to 937,000 units (seasonally adjusted). Sales on a year-ago basis are down 20.1%. Despite the large drop in sales, the median price of a new home was $239,800 in January, up slightly $239,400 the previous month. Lastly, inventories surged 19.3% in January to 6.8 months of supply and—compared to one year ago—are up 28.3%. The housing market should continue to be weak in the coming months. 

Personal Income
Personal income surged 1.0% in January, doubling the 0.5% gain in December. Consumption rose 0.5% in January, a deceleration from the 0.7% increase seen in the previous month. On the inflation front, the top-line PCE deflator grew 0.2% while the core PCE deflator, which excludes food and energy, jumped 0.3%. On a year-ago basis, the PCE deflator is up 2.0% and the core PCE deflator has risen 2.3%. Lastly, the savings rate decreased in January to -1.2%.

ISM Index
The ISM index returned to expansionary territory in February, rebounding to 52.3 from 49.3 in January. Growth was broad-based across the index, with new orders and production both posting strong gains. On the whole, however, February's report is mixed. Inventories rose to 44.6, but the ongoing correction cycle remains a major concern for the manufacturing sector going forward.