There are two new reports on the U.S. economy worth mentioning this morning. First, data from the Federal Reserve Bank of Philadelphia showed that manufacturing activity in the Mid-Atlantic region of the country accelerated in January, as the general business conditions index rose from +19.7 to +23.6. That was the second monthly improvement in a row, much better than economists had anticipated, and the highest headline reading in roughly two years. Current measures of new orders, inventories, and total employment all firmed this month, while gauges of shipments and the average employee workweek deteriorated. Forward-looking indicators (six months ahead) generally improved in January but reported capital expenditure plans declined. Inflation pressures jumped this month, suggesting greater margin strain for manufacturers but not too surprising given the recent data on wholesale and consumer price trends. Business managers in the January survey were also asked a few special questions about recent and projected sales activity. More than half of respondents said that demand for their manufactured products had “increased modestly” over the past several months, and nearly two-thirds of managers expect total production to improve in the first quarter of 2017 compared to Q1 2016. When asked what will be needed to increase production in the second quarter, 27.3 percent of managers said “increasing productivity of current staff,” 18.2 percent said “increasing work hours of current staff,” and 13.6 percent said “hiring additional workers.”
Elsewhere, a report from the U.S. Census Bureau showed that privately-owned housing starts in December grew at a seasonally adjusted annual rate (SAAR) of 1.226 million units. That was an 11.3 percent jump from November’s upward-revised print, a better rebound than economists had anticipated, and the second-largest monthly increase of 2016. However, essentially all of the headline gain in December resulted from a 53.9 percent surge in multi-family units (rentals), while single-family housing starts declined by 4.0 percent. Regionally, housing starts decreased in the South (-1.4%) last month but rose in the Northeast (+18.5%), the Midwest (+31.2%), and the West (+23.5%). Total building permits, a popular gauge of future construction activity, slid by 0.2 percent in December, in line with yesterday’s slight pullback in homebuilder sentiment. Single-family building permits, though, rose to a recovery high last month, suggesting that the recent slowdown in single-family starts may be temporary.
Sources: Econoday, Bloomberg, ZH, U.S. Census Bureau, FRBP, FRBSLPost author: Charles Couch