Five Charts to Help You Understand Tuesday's U.S. Economic Data

(Bloomberg) -- Tuesday was a busy day for U.S. economic data, with orders for business equipment unexpectedly declining in January for a second month and consumer confidence vaulting to a 17-year high. Reports also showed solid home-price gains, the widest merchandise-trade deficit since 2008 and a jump in inventories. Here are five charts to help you sort through the numbers:

1. Capital Spending Slows

After an investment surge in the second half of 2017, companies are beginning to throttle back. January orders for non-defense capital goods excluding aircraft, a proxy for business investment, dropped 0.2 percent, bringing the three-month annualized growth rate to 3.7 percent, government figures showed. Shipments of those goods, used to calculate gross domestic product, climbed at an 8.3 percent pace in the three months ended in January and compares with a 12.5 percent rate in December. Nonetheless, economists remain upbeat about the landscape for investment spending on the heels of reduced tax rates and increased business optimism.

2. Consumer Optimism Prevails

The Conference Board index of Americans’ confidence rose in February to 130.8, the highest since November 2000. Consumers have plenty of reasons to be optimistic, with a brighter outlook on employment and income amid bigger after-tax paychecks following the tax-cut legislation signed in December. The share of households who expect incomes to rise in the next six months rose to the highest since 2001. Such sentiment may provide more fuel for consumer spending, and the survey showed buying plans for homes, major appliances and new cars increased this month.

3. Housing Price Gains Solid

The rebound in home prices continues unabated, reflecting steady demand alongside a persistent scarcity of inventory. S&P CoreLogic Case-Shiller’s national home-price gauge and its 20-city index advanced a solid 6.3 percent in December from a year earlier. The annual gain spanned all 20 cities in the index and was led by Seattle, Las Vegas and San Francisco. Property values are outpacing wage growth and inflation, translating into rising home equity for owners. At the same time, the appreciation is occurring alongside a jump in mortgage costs, which is a headwind for prospective buyers.

4. Wider Trade Deficit

5. Stockpiles Increasing

America’s merchandise trade deficit widened in January to $74.4 billion, the highest since 2008, as a slump in exports far exceeded the drop in imports. The more moderate decline in imports reflected a jump in the value of incoming shipments of industrial materials that include petroleum. Oil prices surged in January and the government’s trade figures aren’t adjusted for changes in prices. While the goods-trade gap suggests trade will weigh on first-quarter growth, the advance economic indicators report also showed a surge in inventories at both wholesalers and retailers, a positive for gross domestic product.

--With assistance from Shelly Hagan

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net, Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net.

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle

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