In December new orders grew strongly for defense aircraft (+$3.7 billion, +168.3%) and defense capital goods (+$9.1 billion, +90.2%), helping boost overall durable goods orders by +2.4% (+$5.68 billion) for the month. However, civilian aircraft orders fell -74.7% (-$4.3 billion), and, along with drops for computers (-9.7%), non-defense capital goods (-6.5%), and machinery (-1.1%), orders excluding defense fell -2.5% (-$5.8 billion). New orders excluding transportation ticked down -0.1%. On a yearly basis overall new orders were down -1.5%, with capital goods down -5.2%, and core capital goods, which exclude defense and aircraft orders, up +0.8%.

As expected, the Federal Reserve left the federal funds target rate in the 1-1/2 to 1-3/4 percent range in its January meeting. The meeting announcement downgraded household spending from “strong” in the previous release to “moderate”, and noted that that business fixed investment and exports remained weak but also that job gains were solid and unemployment remained low. In a press conference following the meeting announcement, Federal Reserve Chairman Powell remarked that there were some signs that global growth might be stabilizing, although uncertainties remained, including the effect of the coronavirus, which they are monitoring carefully.

The first estimate of GDP for 2019 Q4 remained at 2.1%, unchanged from Q3’s 2.1% rate, and dropping 2019 yearly GDP to 2.3% vs. 2.9% in 2018. Compared to Q3, GDP was positively influenced by decreases in imports, an acceleration in government spending, and a smaller decrease in nonresidential investment. These positive contributions were offset by negative contributions from a larger decrease in private inventories and a slowdown in consumer spending. The PCE price index rose to 1.6% for the quarter (+0.1%), but the core index, which excludes food and energy costs, dropped to 1.3% (-0.8%). After tax disposable personal income slowed from growing 4.5% in Q3 to 3.1% in Q4, with inflation adjusted real disposable personal income slowing to from 2.9% in Q3 to 1.5% in Q4.