Implications: The New Year starts with reports like many of last year's, one up, one down. Manufacturing sentiment surprised on the upside in December, with the ISM manufacturing index rising to 50.7, only the third time in the last seven months that the index has been above 50. According to the Institute for Supply Management, a level of 50.7 is consistent with real GDP growth of 2.7%. More likely, today's data is consistent with what will be roughly 1.5% real GDP growth in Q4. We expect manufacturing to rebound over the coming months as policy uncertainty and the effects of Sandy continue to subside. The best news in today's ISM report was that the employment index showed expansion, coming in at 52.7. Also, the new orders index, although remaining unchanged at 50.3, showed expansion for the fourth straight month. On the inflation front, the prices paid index rose to 55.5 in December from 52.5 in November. We expect prices, and inflation, to continue to gradually move higher. In other news this morning, construction declined 0.3% in November (-0.7% including revisions for prior months). The decline in November was due to commercial construction (particularly power plants) and federal government construction. Meanwhile, home building was up 0.4% in November, led by new single-family homes. All residential construction – single-family, multi-family, and improvements – is up 19% from a year ago.
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Posted on Wednesday, January 2, 2013 @ 12:16 PM
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