The U.S. economy, as measured by GDP, grew at a 3.2% in the fourth quarter, a faster pace than the third quarter’s 2.6% growth rate, but below the forecast of a 3.5% rate of growth. The positive signs in the report were personal consumption rose from 2.4% to 4.4% in the quarter driven by purchases of durable goods which rose a strong 21.6%. The Core PCE price index (an inflation measure favored by the Fed) continued its slowing trend falling to a 0.4% rate of increase in prices, the lowest rate of growth in the PCE price index on record.
In the final economic data release for the week, the Thomson Reuters/University of Michigan index consumer sentiment decreased slightly to 74.2 from 74.5.
As the GDP data was “old” news in the sense that it is backward looking, the markets are reacting today to weaker than expected earnings from Ford, GM and Microsoft. U.S. stocks are lower and we see a modest improvement in bonds.
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