Thanks to low interest rates, stimulus, and shifting spending patterns, consumer durable goods spending continued to grow at its fastest rate in decades.
Real disposable income was 8% below January’s level. However, it was still higher than the disposable income for any month since July 2020.
It is likely that the January orders were affected by shift and/or plant shut downs in the automotive industry due to a lack of computer chips. Also, it should be expected that February order totals will be somewhat sluggish for the same reason in addition to the deep freeze from Texas through much of the Midwest.
Strong demand for new, large and luxury vehicles comes at a time when automotive production is 20% below its pre-pandemic level. Much of this disconnect between supply and demand is a matter of crippled supply chains and unfortunate events.
The last 25 years of data of the Federal Reserve Bank’s Fed Funds rate, corporate loan rates, inflation and economic growth testify to the complexities of the modern economy. The data reviewed in this piece provide recent examples of just how unpredictable the economy can be and just how little control the Fed has when trying to construct a particular economic outcome.
February industrial production contracted 3.8%. The contraction accelerated because of the winter storm in Texas and other parts of the midwest hindered production and significant supply chain disruption, particularly regarding computer chips, forced a number of manufacturers to slow or stop production.
In February, durable goods capacity utilization was 71.9%, which was the lowest rate of capacity utilization since October 2019. However, it should rebound in March.
There were 117,200 housing permits filed in February 2020, which was the highest total for February since 2006.
The Gardner Business Index (GBI) notched it’s seventh consecutive month of expanding business activity. This latest expansion has been driven by strong domestic new orders -and as a result of more tepid production growth- quickly expanding backlog activity. Rising employment in the sector has also boosted overall business activity.
The real 10-year Treasury rate, which is the nominal rate minus the rate of inflation, was 0.17%. February was the first month since December 2019 that the real rate was above 0%.
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