Economic nuggets: Analyzing the numbers

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Bernard M. Markstein, Ph.D.Economic Nuggets is a monthly analysis from Bernie Markstein, US Chief Economist for Reed Construction Data. He is a Senior Business Economist with extensive experience analyzing, interpreting and forecasting macroeconomic and regional data. His primary experience in analysis and research in housing and financial markets. He was previously the Vice President, Economic Forecasting and Analysis for the National Association of Home Builders. Here are his February Economic Nuggets, which can be found here.

1. Congress passed and the president signed into law a $1.1 trillion appropriations bill, funding federal government operations for the current fiscal year (through September 30).

2. Federal debt is now approaching the current legal debt ceiling. The Treasury should be able to keep the government running until around the end of February before hitting the debt ceiling. Congress needs to raise the ceiling immediately. Waiting until the last minute, as Congress frequently does, will do harm to the faith in U.S. debt obligations and cause some temporary turmoil in the financial markets.

3. Unusually bad weather in much of the country in December and January (and now in early February) has and will adversely affect many of the reported economic numbers. The seasonally adjusted numbers may overstate the resulting downturn, as the seasonal adjustment process amplifies the impact of the weather. Some of the lost economic activity will be regained in future months once the weather improves

4. December total commercial construction spending was $930.5 billion (SAAR), up 0.1% from November and up 4.8% for the year
• Nonresidential building construction spending was $304.6 billion, down 3.1% for the month, but up 0.1% for the year. Spending in all of the categories was down in December.

• Commercial (mainly retail) construction spending fell 1.3% in December after a 5.3% surge in November; spending for the year was up 6.6%
• Health care construction spending was down 1.5% in December after dropping 2.1% in November. For the year, spending was down 2.5%
• Education construction spending plunged 5.5% in December after declining 0.6% in November. For the year, spending was down 6.5%
• Manufacturing construction spending dropped 4.9% in December after advancing 1.2% in November. Nonetheless, spending was up 5.4% for the year.

• Heavy engineering (non-building) construction spending was $268.5 billion, up 0.7% in December after rising 0.4% in November, but down 3.3% for the year.
• New residential construction spending in December was $221.7 billion, up 2.6% in December after increasing 1.8% in November and up 28.9% for the year.

5. The December AIA Architecture Billings Index (ABI) fell for the third consecutive month—down 1.3 points to 48.5. For the second month in a row, the measure was below 50, a troubling development.  A reading below 50 indicates decreased billings, a negative for future commercial construction

6. The advance estimate of fourth quarter 2013 real (inflation-adjusted) gross domestic product (GDP) growth was up 3.2% (SAAR), down from third quarter’s strong 4.1% increase. This estimate is based on incomplete data and thus subject to revision next month when more data will be available.
• Consumer spending was a major factor contributing to real GDP growth, up 3.3% following a rise of 2.0% in the previous quarter—its best performance since fourth quarter 2010.

7. The January NAHB/Wells Fargo Housing Market Index (HMI) fell 1 point from December to 56. Nevertheless, it was the eighth month in a row the index was above 50―a positive for single-family residential construction.

8. December new home sales plunged 7.0% to 414,000 (SAAR) after dropping 3.9% in November. For the year, sales were 428,000, an increase of 16.3% over 2012.

9. For all 20 cities, home prices on a year-over-year NSA basis have increased for 11 months in a row. On a monthly SA basis, prices rose in all 20 cities for the fourth consecutive month.

10. The November SA Federal Housing Finance Agency’s (FHFA) Purchase-Only Home Price Index rose a more modest 0.1%, extending its streak of consecutive monthly increases to 22. On a year-over-year NSA basis, the index was up 7.6%.

11. The SA Producer Price Index (PPI) for finished goods increased 0.4% in December after declining 0.1% in November. On a year-over-year NSA basis, the December PPI was up 1.2%.

12. A price index for inputs used in nonresidential construction, excluding capital equipment, inched up 0.1% (NSA) in December after decreasing 0.6% in November. The index was 1.0% (NSA) higher than in December 2012, while the PPI for inputs for residential construction was up 1.6% over the same period.

13. The Consumer Price Index (CPI) increased 0.3% (SA) in December following no change in November. The CPI was 1.5% (NSA) higher than in December 2012. Core CPI, which excludes food and energy prices, inched up 0.1% (SA) in December after rising 0.2% in November. On a year-over-year basis, the index was 1.7% (NSA) higher than in December 2012.

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