NAM: Monday Economic Report
The IHS Markit Flash U.S. Manufacturing PMI grew at the fastest pace on record in January, making the sector a continued bright spot in the U.S. economy. New orders, exports and output expanded at the best rates since mid-2014, with employment rising at paces not seen since January 2019. Respondents remained extremely upbeat in their outlook for the coming months, even as input costs rose at the strongest rate since May 2018.
The Philadelphia Federal Reserve Bank reported that activity expanded in January at the strongest pace since the pandemic began, which was encouraging. More than 62% of business leaders in the district expect new orders and shipments to rise over the next six months.
In Europe, manufacturing activity also stayed strong, even with some easing in January. This stands in contrast with the IHS Markit Flash Eurozone Services PMI, which contracted further for the month on strict restrictions due to renewed COVID-19 cases. Service-sector businesses have struggled for five consecutive months.
New residential construction rose 5.8% to 1,669,000 units at the annual rate in December, the strongest pace since September 2006. The data were buoyed by strength in the single-family segment, which increased to 1,338,000 units, also the best since September 2006. On a year-over-year basis, housing starts have risen 5.2% from 1,587,000 units in December 2019, with single-family activity jumping 27.8% over the past 12 months.
The housing market has been boosted by historically low mortgage rates, even with interest rates inching slightly higher in recent weeks. Housing permits soared to 1,709,000 units in December, the strongest pace since August 2006. On a year-over-year basis, housing permits have risen 17.3% since December 2019, with single-family permits jumping 30.4% over the past 12 months.
These increases point to solid growth in the housing market over the coming months. For their part, builders also feel upbeat in their expectations for single-family sales over the next six months despite sentiment easing for the second straight month from November’s record high.
Initial unemployment claims pulled back somewhat in the latest data, but continued to remain too high, with 900,000 claims for the week ending Jan. 16.
The Bureau of Economic Analysis will release the first estimate of fourth quarter real GDP on Thursday, with 5.5% annualized growth expected. Overall, the U.S. economy should decline 3.4% in 2020, but with 4.3% growth forecasted in 2021, according to current estimates.