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 surged in February, as the general business conditions index nearly doubled from +23.6 to +43.3. That was the third monthly improvement in a row, significantly better than expected, and the highest headline reading since 1984. Current measures of new orders, shipments, and hours worked all improved this month but inventories contracted and employment growth moderated. Many forward-looking indicators (six months ahead) softened slightly in February but remain near the best levels of the recovery, and capital expenditure plans continued to improve. Margin strain for manufacturers appeared to still be elevated, although this is not too surprising given the recent data on wholesale and consumer inflation. Business managers in the February survey were also asked a few special questions about pricing trends, and respondents said that they expect employee compensation costs (wages plus benefits on a per employee basis) to rise at a pace of 3.0 percent over the next four quarters.
Elsewhere, a report from the U.S. Census Bureau showed that privately-owned housing starts in January grew at a seasonally adjusted annual rate (SAAR) of 1.246 million units. That was a 2.6 percent decline from December’s upward-revised print but still better than economists had anticipated. Starts of multi-family units (rentals) fell by 7.9 percent in January, while single-family housing starts rose by 1.9 percent. Regionally, housing starts decreased in the West (-41.3%) and the Midwest (-17.9%) last month but rose in the Northeast (+55.4%) and the South (+20.0%). Total building permits, a popular gauge of future construction activity, lifted by 4.6 percent last month, better than expected but due mainly to a 23.5 percent jump in rental authorizations. NAHB chairman Granger MacDonald added that “While builders remain optimistic, we are seeing the numbers settling back into a normal range. Regulatory burdens remain a major challenge to our industry, and NAHB looks forward to working with the new Congress and administration to help alleviate some of the pressures that are holding small businesses back and making homes less affordable.”
Sources: Econoday, Bloomberg, ZH, FRBP, U.S. Census, NAHB, FRBSLPost author: Charles Couch