1. Real (inflation-adjusted) gross domestic product (GDP) fell 0.1% at a seasonally adjusted annual rate (SAAR) in the last quarter of 2012. This apparent stall in the economy was largely due to a plunge in defense spending and a drop in business inventories. The sharp fall in defense spending is unlikely to be repeated unless sequestration goes into effect next month. The decline in business inventories appears to be unintended and is likely to be reversed in coming months, adding to growth in the near term. Note also that the growth figure is an advance estimate, based on incomplete data and subject to revision.
    • The GDP numbers included a 1.1% (SAAR) decrease in investment in nonresidential structures. However, this estimate was based on data released in January and did not include the positive numbers released earlier this month (see below).  Expect the nonresidential structures number to be revised up in next month’s GDP release.
  1. Congress passed, and the president signed into law, a measure temporarily increasing the debt ceiling until May 18—pushing the problem down the road a bit. If a longer-term resolution to the debt ceiling emerges, then the delay is helpful; if the delay leads to more short-term outcomes, or if the ceiling is not raised at all, then the economy will suffer, with the real possibility of a recession.

  2. Total commercial construction spending rose 0.9% in December—its ninth consecutive monthly increase—to $885.0 billion (SAAR). For the year, spending increased 9.2% over 2011. The December spending figure includes the following:
    • Nonresidential building construction spending advanced 1.0% to $301.0 billion and for the year was up 5.6%
    • Heavy engineering construction spending fell 0.5% to $269.4 billion, but was up 7.4% for the year
    • New residential construction spending grew 1.4% to $176.4 billion and was up 19.6%  for the year
  1. Employment continues to improve, although not as rapidly as most would like. January nonfarm payroll employment rose 157,000 on a seasonally adjusted (SA) basis. For 2012,  nonfarm payroll employment was adjusted up an average of 494,000 per month as a result of the annual benchmark revision process, which incorporates data from more sources than are normally included each month.
    • The unemployment rate inched up to 7.9% (SA) from December’s 7.8%. The increase was due to job seekers entering the labor force faster than the increase in employment, driving the unemployment rate higher
    • The January not seasonally adjusted (NSA) unemployment rate for construction workers was 16.1%, down from 17.7% in January 2012. Despite the still high unemployment rate for construction workers, some parts of the country report construction labor shortages
  1. Housing continues its upswing, with real residential investment increasing 15.3% (SAAR)  in the fourth quarter.
    • Single-family housing starts jumped 8.1% to 616,000 (SAAR) in December, their highest level since June 2008. For the year, starts were up 24.4%. Single-family housing permits rose 0.9% to 573,000 in December—their highest level since June 2008—and were 22.9% higher for 2012
    • The January NAHB/Wells Fargo Housing Market Index (HMI) held steady at 47—unchanged from December—leaving the index for the two months at its highest level since April 2006
    • Housing prices continue to move higher. Both the 10-city and 20-city S&P/Case-Shiller® Home Price indexes notched their tenth consecutive monthly increase. The November 10-city index increased 0.5% (SA), and the 20-city index increased 0.6%. On a year-over-year NSA basis, the 10-city index was up 4.5%, and the 20-city index was up 5.5%. Home prices fell for only one of the 20 cities in November: New York City prices declined 0.3%. New York City was also the only city where housing prices were down on a year-over-year basis—1.2% lower
    • Multifamily housing starts surged 20.3% to 338,000 (SAAR) in December after dropping 6.3%  in November. The 3-month moving average, which smoothes out the erratic monthly moves, was up 10.2% to 306,000—its highest level since August 2008. For the year, starts increased 37.2%
    • The December 3-month moving average of multifamily building permits fell 1.5% to 320,000 from November’s 325,000. December average permits were still the second highest since August 2008. For the year, multifamily permits were 46.6% higher than 2011
  1. The AIA Architecture Billings Index (ABI) fell from 53.2 in November to 52.0 in December. Despite the decline, the index remained above 50, indicating increased billings—a positive sign for future commercial construction. It was the fifth month in a row with a reading above 50.

  2. Inflation remains relatively mild. The December Producer Price Index (PPI) for finished goods slipped 0.2% (SA) after declining 0.8% in November. On a year-over-year NSA basis, the index was up a modest 1.3%.
    • A price index for inputs used in nonresidential construction, excluding capital equipment, fell 0.3% (NSA) in December after dropping 1.3% in November. The index was 0.8% higher than it was in December 2011.
  1. The December Consumer Price Index (CPI) was unchanged (SA) from November. The CPI was 1.7% (NSA) higher than December 2011. Core CPI, which excludes food and energy prices, rose 0.1% (SA) for the second month in a row and was up 1.9%  (NSA) from December 2011.