REAL ECONOMY BLOG | February 27, 2024


The Federal Reserve’s restrictive monetary stance showed that it continues to affect the economy in the first two months of the year.

In other words, the Fed is getting closer to its goal of achieving a soft landing when the economy cools back down to a sustainable level of growth with inflation under control.

January’s spending on durable goods orders fell by a sharp 6.1%, driven mostly by a drop in demand for Boeing’s planes and defense spending. Still, when both of those components are stripped away, orders for core capital goods—a proxy for future business equipment spending—rose by only 0.1%, following a downward revision to December’s number from up 0.2% to down 0.6%.

Capital goods spending

The bright spot was the increase in shipments of core capital goods, which rose by 0.8% in January, the highest monthly increase in a year. It certainly will help add to overall gross domestic product in the first quarter, which in our opinion will be stronger than what the market is expecting.

But in the longer horizon, it looks less likely that shipments will continue to stay that strong based on the slowdown in orders. Both series are beginning to show signs of topping out on a nominal basis. When inflation is added to the mix, spending volume looks a lot less impressive. That shows the impact of restrictive monetary policy on investment spending, a reason why we think the Federal Reserve should cut rates this year.

Consumers seem to agree on a slowdown ahead as the Conference Board’s consumer confidence Index dropped in February despite the market’s expectation of further improvement. The index fell to 106.7 in February from 110.9 in January.

That is the first drop in 5 months, driving in part by a less abundant job market according to the survey’s respondents. The labor differential index—measured the difference between job-plentiful and job-hard-to-get responses—falls to 27.8 from 31.7, the first drop in 4 months.

While February’s labor differential index remains above what it was in the second half of last year, it does suggest a drop in job gains ahead of the highly anticipated job reports coming out next week. But it should not be a reason for any concern as we continue to expect job gains to remain stronger than what the economy needs to achieve a soft landing.

Inflation expectations for the next 12 months continue to fall, down to 4.2% from 4.3% in January, and from 5.4% a year ago. In terms of spending plans, the respondents indicated more appetite for automobile and major household appliance purchases while home buying plans fell slightly.

The takeaway

The economy is expected to cool down in 2024, yet on a much stronger trajectory than previously thought given the recent economic data. Even though we might not see the same kind of growth at 3% to 5% like last year, the economy is likely to grow above 2% in the first quarter. and if you put that in context, that is still higher than the long-run growth rate, which has been only around 1.8%.

Let’s Talk!

Call us at (302) 652-4194 (Wilmington Office), (302) 730-4560 (Dover Office) or fill out the form below and we’ll contact you to discuss your specific situation.

  • Should be Empty:
  • Topic Name:

This article was written by Tuan Nguyen and originally appeared on 2024-02-27.
2022 RSM US LLP. All rights reserved.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Horty & Horty, P.A. is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how Horty & Horty, P.A. can assist you, please call us at 302.652.4194 (Wilmington Office) or at 302.730.4560 (Dover Office).