ECONOMIC NUGGETS – March 7, 2013

03/10/2014 by Bernie Markstein

1. Congress passed, and the president signed into law, legislation suspending the debt ceiling through March 15, 2015, which removes one of the huge potential stumbling blocks for the economy. The nation will continue to pay its bills, including debt payments. Combined with the previously approved appropriations bill, suspending the debt ceiling insures the federal government will continue to function and allows businesses to focus on other issues
2. The Board of Governors of the Federal Reserve System has a new chair person, Janet Yellen, who is replacing Ben Bernanke. Do not expect any change in policy in the near term. The Fed will continue to taper its purchases of long-term assets, winding down its program of Quantitative Easing (QE). The speed of the Fed’s QE exit strategy will be determined by economic conditions, with a particular eye on the health of the labor market
3. The Fed taper puts mild upward pressure on interest rates. The Fed’s actions, however, should be kept in context. The Fed’s asset portfolio currently exceeds $4 trillion, compared to less than $1 trillion when QE was started. With the Fed still making long-term asset purchases, the impact of the taper on current market conditions is minor. At present, the Fed is adjusting its purchase program down by $10 billion every month or so. Eventually, the Fed will stop buying long-term assets and begin reducing its holdings, presumably by increasing its divestiture of long-term assets by $10 billion every month or so. With a $4 trillion-plus portfolio, it will be at least a year or two before the Fed’s actions have a major impact on interest rates
4. January total commercial construction spending was $943.1 billion at a seasonally adjusted annualized rate (SAAR)—up 0.1% from December, up 9.4% on a year-over-year not seasonally adjusted (NSA) basis, and up 4.9% for 2013 over 2012. December spending was revised up by $11.4 billion, 1.2% of the previously reported total, changing a 0.1% monthly increase into a 1.5% gain
• Nonresidential building construction spending was $304.2 billion, a 1.0% decline and its third consecutive monthly decrease. On a year-over-year NSA basis, spending was up 5.1%. Spending for November was revised down by $3.0 billion, which was partially offset by an upward revision of $2.7 billion for December. All major spending categories except manufacturing were down in January

• Commercial (mainly retail) construction spending fell 2.5% in January, but was up 13.4% on a year-over-year NSA basis
• Health care construction spending was down 1.2% in January and was down 5.3% on a year-over-year NSA basis
• Education construction spending dropped 1.6% in January and 2.4% on a year-over-year NSA basis
• Manufacturing construction spending rebounded 3.5% in January after falling 3.2% in December. On a year-over-year NSA basis, spending was up 7.1%
• Heavy engineering (non-building) construction spending was $274.5 billion—up 0.4% in January and up 6.9% on a year-over-year NSA basis, but down 3.2% for 2013. Spending for November was revised down by $2.1 billion, which was more than offset by an upward revision of $4.9 billion for December
• The January increase was due to transportation (+1.2%), communication (+18.2%), and highway (+3.7%) construction spending
• The January increase was partially offset by power (-5.0%), water and sewer ( 2.1%), and conservation and development (-10.0%) construction spending
• New residential construction spending in January was $226.3 billion—up 1.7% for the month,  up 21.3% on a year-over-year NSA basis, and up 29.0% for 2013

5. The January AIA Architecture Billings Index (ABI) jumped 1.9 points to 50.4, ending a three months slide and putting the measure above 50 for the first time since October. An index number above 50 indicates rising billings, a plus for future commercial construction
6. February nonfarm payroll employment increased a seasonally adjusted (SA) 175,000 jobs—a better than expected number, given the bad weather across much of the country. December’s increase was revised up from 75,000 to 84,000, and January’s increase was revised up from 113,000 to 129,000
7. The unemployment rate rose from 6.6% (SA) in January to 6.7% in February
8. Total construction employment increased by 15,000 jobs in February after jumping 50,000 jobs in January. February construction employment was up 180,000 on a year-over-year basis
9. The February NSA unemployment rate for construction workers was 12.8%, down from 15.7% in February 2013
10. The second estimate of fourth quarter 2013 real (inflation-adjusted) gross domestic product (GDP) growth was revised down to +2.4% (SAAR) from the preliminary estimate of +3.2%. This estimate is subject to further revision next month when more data will be available
• Investment in nonresidential structures was revised to +0.2% from -1.2%
• Growth in real consumer spending was revised down from +3.3% to +2.6

11. The February NAHB/Wells Fargo Housing Market Index (HMI) plunged 10 points from January to 46, the largest fall in the indexes history and the first time since May 2013 the index fell below 50―a negative for single-family residential construction
12. January new home sales surged 9.6% to 468,000 (SAAR), after falling 3.8% in December. On a year-over-year NSA basis, sales were up a more modest, but strong 6.3%
13. Both the 10-city and 20-city S&P/Case-Shiller® Home Price seasonally adjusted (SA) indexes rose 0.8% in December, the 23rd consecutive monthly increase for both indexes. On a year-over-year NSA basis, the indexes were up 13.6% and 13.4%, respectively
14. For all 20 cities, home prices on a year-over-year NSA basis have increased for 12 consecutive months
15. The December SA Federal Housing Finance Agency’s (FHFA) Purchase-Only Home Price Index increased 0.8%, after falling 0.1% in November. On a year-over-year NSA basis, the index was up 7.7%
16. The SA Producer Price Index (PPI) for finished goods increased 0.6% in January, after advancing 0.4% in December. On a year-over-year NSA basis, the January PPI was up 1.5%
17. A price index for inputs used in nonresidential construction, excluding capital equipment, increased 0.5% (NSA) in January after rising 0.1% in December. The index was 1.0% (NSA) higher than in January 2013, while the PPI for inputs for residential construction was up 1.6% over the same period

18. The Consumer Price Index (CPI) increased 0.1% (SA) in January, after advancing 0.2% in December. The CPI was up 1.6% (NSA) from January 2013. Core CPI, which excludes food and energy prices, rose 0.1% (SA) for the second month in a row. The index was also up 1.6% from January 2013

Source: Reed Construction Data