The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.
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January 03, 2007
That's what Bizzy Blog had to say about the combination of a relatively positive report on December manufacturing activity...
Manufacturing in the U.S. unexpectedly expanded and construction spending fell less than forecast, signaling the worst of the economic slowdown is over.
The Institute for Supply Management's manufacturing index rose to 51.4 in December from 49.5 in November...
From the Census Bureau: November 2006 Construction at $1,184.1 Billion Annual Rate
There is some good news in this report - nonresidential construction increased in November.
Nonresidential construction was at a seasonally adjusted annual rate of $316.5 billion in November, 1.4 percent above the revised October estimate of $312.0 billion.
Residential construction spending peaked in December 2005, and the typical pattern is for nonresidential construction to peak 3 to 5 quarters after residential construction. Last month I asked if nonresidential construction had peaked in August 2006 - the answer is: no.
Auto sales data released today look just great, as long as your name is Toyota...
Sales of domestically manufactured cars were down 0.6% from December 2005. That's enough to give 2006 the worst fourth-quarter performance for domestic car sales of the last four years.
Sales at U.S. retailers in December may have risen at the slowest pace in four years as warm weather, falling home prices and rising energy costs discouraged holiday shoppers.
Sales probably increased 2.5 percent, the International Council of Shopping Centers and UBS Securities LLC said today in a statement. The ICSC had previously expected an increase at the low end of 2.5 percent to 3.5 percent. The council will issue a final December figure tomorrow.
U.S. private-sector employment fell by 40,000 in December, the first decline in nearly four years, according to the ADP employment report released Wednesday. "These findings suggest an abrupt slowing of employment," following relatively strong job growth averaging 121,1000 over the past three years," said Joel Prakken, chairman of Macroeconomics Advisers, the economic firm that computes the ADP index from anonymous payroll data provided by Automatic Data Processing Inc.
Although that ADP report prompted a "Gulp!" from Daniel Gross, you might heed BB's warning that "ADP’s correlation with the official Bureau of Labor Statistics report, which comes out Friday morning, has been looser than you would expect." Add to that Barry Ritholtz's admonition that the ADP data has "in the past has been none too reliable," and this picture (updated from last month's macroblog):
But as long as we are discounting data, I'll throw in this, from the Bloomberg post story on the ISM report linked above:
"All the key numbers are looking slightly better,'' said Peter Kretzmer, a senior economist at Banc of America Securities LLC in New York. "I just would not necessarily count on this being the beginning of a strong upswing. The manufacturing sector is growing very slowly.''
In fact, it looks like, as a whole, 2006 in manufacturing looked an awful like
To be sure, the beginning of the year was stronger than the end, though the most glaring difference in the December report is fall-off in prices. That is bad news if the reason is weakness in the sector (and hence relative prices), good news if it is indicative of lower overall price-level trends. I gather from the other news of the day -- the release of the minutes of the December 12 FOMC meeting -- that the markets think the Fed thinks that it is not the latter. Again from Bloomberg:
The dollar rallied and stocks initially advanced before erasing most of their gains after minutes of the Federal Reserve's meeting last month showed central bankers were still concerned about inflation...
Fed officials saw the risk of inflation remaining too high as their "predominant concern'' while predicting economic growth may be "somewhat uneven'' in the coming quarters, according to the minutes of the Dec. 12 meeting released today.
Professor Roubini sums it all up this way:
So you can see the half full glass or the half empty one; but to me the majority of news today looks like on the empty side...
OK -- I'll take the full side.
On the side: The Skeptical Speculator covers the globe and concludes that the "Manufacturing slowdown spreads."
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