Q4 GDP rose +2.6% q/q annualized, beating expectations of around +2.2%. GDP for all of 2018 rose +2.9%, in line with our expectations and tying with 2015 for the highest of the nine-year recovery. But details were grim as consumption grew +2.8% in Q4, a bit of a disappointment, and spending in December actually fell -0.6% m/m, the worst in over nine years. Income also fell -0.2% m/m in January, the most in over six years. Manufacturing data was also weak as new orders for core durable goods fell -1% m/m, the fourth loss in five months, pushing the y/y rate down to +2% from +8.8% five months ago. Similarly the ISM manufacturing index fell from 56.6 to 54.2 points, the lowest level in over two years. In happier news, February Consumer Confidence rose by a sharp +9.7 points, driven by a +14 point leap in future expectations, the biggest gain in over seven years. Consumers evidently felt relief from the end of the government shutdown, a rising stock market, and trade hopes. Fed Chair Powell repeated his patient approach to rate moves in Congressional testimony, and President Trump extended a deadline to raise tariffs on Chinese goods as a result of progress in negotiations.
