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NAM: Monday Economic Report

New residential construction soared 16.9%, up from an annualized 1,375,000 units in November to 1,608,000 in December, its strongest reading in 13 years. Multifamily activity jumped to its fastest pace since December 1986, with single-family starts rising to the best reading since June 2007. In addition, overall housing starts increased by a whopping 40.8% year-over-year, boosted by warmer weather, lower mortgage rates and a strong labor market.

Homebuilder optimism has also been strong, especially for sales of single-family units over the next six months. At the same time, housing permits were more muted, pulling back to 1,416,000 units in December at the annual rate. Those data continue be very encouraging, up 5.6% over the past 12 months and with single-family permitting up a solid 10.8% year-over-year. Manufacturing production rose 0.2% in December, but, overall, the data continued to reflect weaknesses for the sector in 2019. Over the past 12 months, output has declined 1.3%, with year-over-year growth negative for six straight months to end the year. Looking at annual averages, manufacturing production declined 0.2% in 2019, pulling back from the 2.3% gain seen in 2018.

There have been some signs of stabilization in other data points, especially in global markets and considering recent trade developments. My forecast for manufacturing production growth in 2020 is 0.5%. Along those lines, surveys from the New York and Philadelphia Federal Reserve Banks found expanding activity in January, beginning the year on a positive note.

Total industrial production declined 0.3% in December. Utilities output fell 5.6%, largely because there was less spent on heating costs due to warmer temperatures, pulling the headline measure lower. Overall, industrial production fell 1.0% over the past 12 months, declining on a year-over-year basis for the fourth straight month.

Job openings in the manufacturing sector fell to just 388,000 in November, the slowest pace since December 2017. Nonetheless, manufacturing job postings remained elevated over much of 2019, averaging more than 472,000 per month year to date, including the all-time high reached in June (515,000). The overall labor market remains solid, even with softer net hiring, with job openings continuing to outpace unemployment by nearly one million.

Meanwhile, retail spending increased 0.3% in December, with a 0.7% gain if motor vehicles and parts sales were excluded. This suggests that Americans ended the year with healthy gains in spending—a notable contrast to the data in 2018 that disappointed retailers. Retail sales were up a very robust 5.8% year-over-year, but that speaks as much to the weaknesses of the 2018 data as it does to the strength of 2019 retail sales.


Consumer and producer prices were each up slightly in December, buoyed by higher energy costs. Inflation appears to be largely under control, especially for producers, with core PPI up 1.4% over the past 12 months and reflecting decelerated growth over the past year.

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