NAM: Monday Economic Report
Manufacturing production increased 0.8% in November, rising for the seventh straight month, led by strength in durable goods. The largest increases in output in November were in motor vehicles and parts, primary metals, paper, miscellaneous durable goods and aerospace and miscellaneous transportation equipment. Overall, manufacturing production remained 3.7% below the pre-pandemic pace in February.
After November’s data notched the best readings since September 2014, the IHS Markit Flash U.S. Manufacturing PMI pulled back slightly in December. The index continued to signal a strong rebound overall since the spring. Input prices rose at the strongest pace since April 2018. The Eurozone data were also encouraging, improving to the best reading since May 2018, despite lingering COVID-19-related weaknesses in the services sector.
The Kansas City, New York and Philadelphia Federal Reserve Banks each reported expanding manufacturing activity in December, although activity in New York and Philadelphia slowed somewhat. Manufacturers in each district remained very positive in their outlook.
New residential construction rose 1.2% to 1,547,000 units at the annual rate in November, the strongest pace since February. The data were buoyed by continued strength in the single-family segment, which edged up to 1,186,000 units, the best reading since April 2007. The housing market has been boosted by historically low mortgage rates.
Meanwhile, housing permits increased 6.2% to 1,639,000 units in November, the strongest pace since September 2006, pointing to solid growth in the housing market over the coming months. Builders also feel more upbeat in their expectations for single-family sales over the next six months, with sentiment in December not far from the record high seen in November.
Consumer spending at retailers fell 1.1% in November, with Americans slowing their purchasing and extending the 0.1% decline seen in October. This weakness reflects caution on the part of consumers, but also lingering uncertainties related to the continued spread of COVID-19. Despite slipping over the past two months, retail sales have risen 4.1% since November 2019.
Initial unemployment claims totaled 885,000 for the week ending Dec. 12, the highest level since the week ending Sept. 5 and the second straight weekly increase. At the same time, 20,646,779 Americans received some form of unemployment insurance benefit (including state and federal programs) for the week ending Nov. 28.
The Federal Reserve plans to leave short-term interest rates near zero for the foreseeable future. In the economic projections, the median federal funds rate remains the same through 2023, but with some participants forecasting increases beginning in 2022. Beyond interest rates, the Fed will also continue to increase its asset purchases “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”