Inflation rate report, house prices lead economic news this week

One of the biggest burdens on Americans — high inflation — appeared to be receding in the past few months until the latest report revealed an unpleasant spike in January. Could a lesser-known price gauge, followed more closely by the Federal Reserve, deliver better news?

Meanwhile, consumer confidence is recovering from some inflation-induced lulls. Will the February report raise more good vibes or another mood?

Home prices remain sluggish due to high mortgage rates – borrowing costs have fallen slightly recently. Does that pay off in the latest reading on house prices?

This week's economic news will help answer questions important to your pocketbook and others. Here's an overview:

Do companies spend money?

30,000 feet view: Companies have recently been wary of buying more factory machinery, computers and other equipment as high interest rates make borrowing more expensive.

But new orders for such durable goods rose in November and December. Businesses have been encouraged by recession fears and interest rate cuts expected by the Federal Reserve later this year. Nomura economist Aichi Amemiya.

He estimates a key measure excluding aircraft and defense-related goods — a proxy for business investment — will show purchases flat or slightly higher in January when the Commerce Department releases data on Tuesday.

You should worry because: More capital spending means more growth for the economy and more employment in general. After all, new machines usually require workers to run them.

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Are US housing prices falling?

For home sellers, the past six months have been frustrating.

30,000 feet view: The monthly increase in home prices has gradually slowed since the middle of last year as rising mortgage rates spurred home sales. In November, median home prices in major metro areas fell for the first time in 10 months (before seasonal adjustments). S&P CoreLogic Case-Shiller Home Price Index in 20 cities.

Nomura expects more of the same in S&P's release of December figures on Tuesday.

You should worry because: Mortgage rates have generally declined since late last year, and that should boost home sales and prices in the coming months, Nomura says.

Graphic by James Powell

Is consumer confidence high right now?

Americans have been feeling good about their finances and the economy lately, but that could quickly change if the outlook darkens.

30,000 feet view: In January, Consumer confidence It hit its highest level since late 2021 on easing inflation, strong job growth, rising stock prices and the prospect of lower interest rates. Economists polled by Bloomberg estimated Tuesday's announcement that confidence would be flat in February, while Nomura expected a slight improvement.

You should worry because: This move affects household spending and the economy.

Is US Inflation Slowing?

Inflation appeared to be on a steady downward path until the Labor Department's consumer price index raised concerns earlier this month.

Excluding volatile food and energy commodities, the key gauge of the index rose 0.4% in January, putting the annual increase at 3.9%. That has pushed some economists back their forecast for the Federal Reserve's first interest rate cut from May to later this year.

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30,000 feet view: On Thursday, the Commerce Department will release a different measure of inflation called the personal consumption expenditures (PCE) price index. The central bank watches the core PCE index more closely than the core consumer price index, and economists expect a similar 0.4% rise in that PCE reading, as another increase in services such as rent and health care, finance and insurance offset roughly flat goods. Price, says Barclays.

You should worry because: That hike would be the largest monthly increase in a year, Nomura notes, but would reduce the annual increase from 2.9% to 2.8%, slightly closer to the central bank's 2% target. Economists still expect inflation to continue to ease in the coming months as rent increases slow.

The PCE report is expected to show that consumer spending rose a modest 0.2% last month, below December's 0.7% jump.

Is US manufacturing in recession?

The economy is strong and resilient. But the country's manufacturers do not realize it.

30,000 feet view: U.S. manufacturing activity contracted for 15 months as consumers shifted their spending from goods to services as the pandemic and businesses grappled with high interest rates and bloated inventories.

You should worry because: On Friday, the Institute for Supply Management said factory activity is expected to have contracted again in February, but the total activity level — which includes new orders, production, jobs and other components — will be the highest since October 2022. Big improvement below the expansion area.