Mixed data for the US economy as investors hold their breath for landmark Donald Trump speech
Important indicators in the US economy showed a mixed picture as investors await a landmark speech by President Donald Trump.
Trump will address the US Congress on 9pm GMT on Tuesday evening. He is expected to deliver some long-awaited detail on his economic policies, including campaign promises of up to $1 trillion (£800bn) in infrastructure stimulus.
Orders for durable goods rose by 1.8 per cent in the month, slightly more than expected in January as the US manufacturing sector anticipates friendly policies from the new administration.
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However, pending home sales fell by 2.8 per cent in the same month to their lowest point in a year, according to the National Association of Realtors, surprising economists who were expecting sales to continue a slow but steady rise.
The dip in home sales suggests confirmed purchases could follow the leading indicator down, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.
He said: “We expected pending sales to dip, lagging the downturn in mortgage applications last summer and early fall, before the election, but this is a bigger drop than we anticipated. It likely won't last, though, given the surge in mortgage demand after the election.”
Meanwhile, the rebound in durable goods orders, after a 0.8 per cent fall in December, was put down almost exclusively to a big rise in commercial aircraft orders.
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Andrew Hunter, an economist at Capital Economics, said: “The underlying details of the report were a little disappointing, but the survey evidence suggests that business equipment investment should continue to recover gradually.”
The data had little effect on markets as investors hold their breath before Trump’s speech. The yield on benchmark 10-year US Treasury bonds rose by as much as five basis points off their lowest point since November ahead of the speech.
Trump's economic adviser, Steven Mnuchin, has said he will target tax reform in their first Budget, while the President today promised to "start spending on infrastructure big".
More by way of explicitly pro-growth policies could prompt a surge in yields, which move inversely to prices, as investors move money from bonds to stocks which would benefit from stimulus.