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1/5/2015

U.S. Economy

While consumer spending receiving a boost from lowered inflation, other key areas of the economy are looking fragile.

·The manufacturing sector is losing steam. Durable goods orders for November came in well below expectations, falling 0.7 percent. With orders, as well as shipments, slowing, equipment investment is slowing significantly from the double digit growth in third quarter. The ISM manufacturing index has also fell to 55.5 in December, lowest since June.

·Housing market showed little sign of improvement. Home sales continue to struggle as investor activity has faded and traditional buyers have been slow to fill the void. New home sales fell for the second consecutive month in November 2014. Existing home sales also fell in November and, down 3.7 percent comparing to the same period last year. Home prices also continue to rise at a more moderate pace than earlier in 2014.

Global Economy

Economic growth in the overall euro area remains sluggish and inflation is dangerously close to zero. The euro has fallen to its lowest level against the dollar in nearly four years on expectations that the ECB will soon announce a program of sovereign bond purchases. Uncertainty about Greek’s political future also threatens to further weight on the euro area economy.