US DATA: New Home Sales End 2025 Strong, But Early 2026 Momentum Doubtful

As with other housing market data, new home sales finished 2025 strong - but it's questionable whether momentum will continue into 2026. * In a combined November/December report (due to federal government shutdown delays), new sales closed the year at 745k on a seasonally-adjusted, annualized basis. They were up 15.5% in November to 758k, thus down 1.7% in December, but those were the two strongest months since February 2022. * Sales soared in the West region, to 170k in December from 110k in October. * Supply tightened, with months of supply down to 7.6 vs 9.0 in October, lowest since March 2022. Median prices were down 2.0% Y/Y, reflective of seller discounts. * But inventories remain elevated on a historical basis. And despite the jump at the end of the year, 2025 as a whole saw average monthly new home sales basically identical to 2024 (682k vs 685k). * And judging from homebuilder sentiment, any improvement looks to have been short-lived. The pullback in the NAHB survey to 36 in February from 37 prior (38 consensus) marked a 5-month low and the 2nd straight decline, suggesting any nascent momentum in homebuilder sentiment has halted (the NAHB had risen in each of the 4 months prior to January). * We continue to expect housing starts/residential construction momentum to remain limited.

US DATA: Solid Services Consumption Offsets Goods Weakness Amid Slowing Savings

December's real personal income and spending figures showed significant divergence between goods and services consumption, and while employee compensation remained solid, net personal savings continue to dwindle. * Real disposable income has flatlined since August 2025 and is below the level of March/April 2025 (though those were boosted by one-off Social Security payments), with December showing a very slight decline (-0.03% M/M). * Worker compensation remains very robust at a 4.3% quarterly run rate in Q4 (0.2% M/M in Dec), though overall income is rising at a relatively slower pace (0.3% M/M in Dec but 3.5% for Q4 as a whole). Real personal income excluding government transfers was -0.1% M/M and has effectively flatlined since July. * The 3.0% quarterly rise in disposable income is whittled down to just 0.1% after adjusting for inflation, while it's rising at just a 0.9% Y/Y pace, the slowest since 2022. * Even so, spending growth continues to eclipse that of income, with personal savings (disposable personal income minus outlays) falling for an 8th consecutive month. The overall households savings ratio declined to 3.6% from an upwardly revised 3.7% prior for a fresh post-October 2022 low, and while this series is subject to large revisions, the trend is clearly to the downside. * The level of personal savings is back to end-2022 levels ($830.8B, down $400B since April). * As presaged by the very poor advance retail sales report, real goods spending fell in December by the most since May, at -0.5% M/M (on a 0.1% nominal decline) vs +0.3% prior (for Q4: -0.1%, just the second negative quarter since January 2023). It also fell 0.1% Y/Y, the first such decline since March 2023. * As such, higher goods prices are taking a bite out of measured real consumption. (Note core goods PCE inflation rose to 0.43% M/M after being flat for the prior 2 months; core services inflation picked up to 0.345% after 0.28% averge in the prior 2 months). * On the other hand, services spending was solid in December and in the quarter as a whole, not really skipping a beat from Q3. Real services spending rose 0.3% M/M (0.1% prior) in December on a 0.7% M/M nominal jump, sealing a 3.4% quarterly pace (3.6% in Q3) and leaving the Y/Y run rate at a solid 2.6%. * The less bright note though is that the breakdown of services spending isn't particularly healthy: the biggest contributor by far was healthcare, up 0.5% for a 2nd month in real terms. Large discretionary aggregates fared less well: food services/accommodations fell 0.7% (same level now as in April 2025) and recreation services up just 0.2%.

US DATA: U.Mich Inflation Expectations and Consumer Sentiment Revised Lower

The finalized U.Mich consumer survey for February saw a both 1Y and 5-10Y inflation expectations nudge a tenth lower whilst consumer sentiment saw most of the increase in the preliminary report revised away. Improved sentiment from those with largest stocks exposure was offset by declines for those without stock holdings. * 1Y inflation expectations: 3.4% (cons & flash 3.5) in Feb final after 4.0% in Jan - confirms lowest reading since Jan 2025 * 5-10Y inflation expectations: 3.3% (cons & flash 3.4) in Feb final after 3.3% in Jan, having seen the same pattern in January reports with an initially higher flash. It remains a tenth off the 3.2% in Dec at was the lowest since Jan 2025. * Consumer sentiment: 56.6 (flash 57.3) from 56.4 in Jan, with the preliminary increase mostly revised away. It doesn't materially change relative trends, with sentiment firming from a December low of 51.0 (lowest since the series low of 50.0 in Jun 2022) but still at historically depressed levels. * From the press release: "All index components posted insignificant movements this month; overall, consumers do not perceive any material differences in the economy from last month. " * "About 46% of consumers spontaneously mentioned high prices eroding their personal finances; readings have exceeded 40% for seven months in a row. Sentiment is about 13% below a year ago and 21% below January 2025. That said, views vary considerably across the population." * "A sizable month-to-month increase in sentiment for the largest stockholders was fully offset by a decline among consumers without stock holdings."

US DATA: Atlanta Fed GDPNow Opens Q1 With 3.1% Projection Driven By Consumption

The Atlanta Fed initiates its GDPNow estimate for Q1 2026 with 3.1% Q/Q SAAR. See table in image below. * PCE is seen driving growth (2.9% growth after 2.4% in Q4) with equipment investment revving up (7.5% after 3.2%) and intellectual property investment remaining strong (6.6% after 7.4%) in what appears a nod to a continued AI-led tech investment boom. * Residential investment is seen contracting again (-2.4% after -1.5%) with nonresidential structures likewise (-0.4% after -2.4%)). * Government spending growth is seen rebounding after the shutdown (+1.6% after -5.1%), while net exports are seen as a drag (-0.5pp after +0.1pp) with inventories a boost (0.8pp after +0.2pp). * GDPNow missed the Q4 estimate badly (1.4% actual, GDPNow 3.0%) but about 1.2pp of the 1.6pp miss can be chalked up to their mis-estimation of the government shutdown impact on growth. * Source: Atlanta Fed