by Calculated Risk on 2/01/2011 12:45:00 PM

Catching up ... the Census Bureau reported this morning that overall construction spending decreased in December compared to November.

[C]onstruction spending during December 2010 was estimated at a seasonally adjusted annual rate of $787.9 billion, 2.5 percent (±1.3%) below the revised November estimate of $807.8 billion.

Private construction spending also decreased in December:

Spending on private construction was at a seasonally adjusted annual rate of $486.9 billion, 2.2 percent (±1.1%) below the revised November estimate of $498.0 billion. Residential construction was at a seasonally adjusted annual rate of $226.4 billion in December, 4.1 percent (±1.3%) below the revised November estimate of $236.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $260.5 billion in December, 0.5 percent (±1.1%)* below the revised November estimate of $261.9 billion.

Click on graph for larger image in graph gallery.

This graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

Both private residential and non-residential construction spending decreased in December.

Residential spending is 66.5% below the peak in early 2006, and non-residential spending is 37% below the peak in January 2008.

Sometime this year (in 2011), residential construction spending will probably pass non-residential spending. Although I expect the recovery in residential spending to be sluggish, residential investment will probably make a positive contribution to GDP and employment growth in 2011 for the first time since 2005. And that is one of the reasons I think growth (both GDP and employment) will be better in 2011 than in 2010.

by Calculated Risk on 2/01/2011 11:09:00 AM

Note: The real key is the seasonally adjusted annual sales rate (SAAR) compared to the last few months, not the year-over-year comparison provided by the automakers. But this is a strong increase for GM ...

From MarketWatch: GM's January U.S. sales jump 21.8%

[GM] said January U.S. sales rose 21.8% to 178,896 cars and trucks. Excluding discontinued brands, sales of GM's four core nameplates rose 23%.

Once all the reports are released, I'll post a graph of the estimated total January light vehicle sales (SAAR) - usually around 4 PM ET. Most estimates are for an increase to 12.6 million SAAR in January from the 12.5 million SAAR in December. Sales in December 2009 were at a 10.7 million SAAR.

I'll add reports from the other major auto companies as updates to this post.

Update from MarketWatch: Ford January U.S. sales rise 13.3%

Update from MarketWatch: Chrysler U.S. January sales up 22.7% to 70,118

by Calculated Risk on 2/01/2011 10:00:00 AM

PMI at 60.8% in January, up from 58.5% in December. The consensus was for a reading of 57.9%.

From the Institute for Supply Management: January 2011 Manufacturing ISM Report On Business®

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew at a faster rate in January as the PMI registered 60.8 percent, which is its highest level since May 2004 when the index registered 61.4 percent. The continuing strong performance is highlighted as January is also the sixth consecutive month of month-over-month growth in the sector. New orders and production continue to be strong, and employment rose above 60 percent for the first time since May 2004. Global demand is driving commodity prices higher, particularly for energy, metals and chemicals."
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ISM's New Orders Index registered 67.8 percent in January, which is an increase of 5.8 percentage points when compared to the seasonally adjusted 62 percent reported in December. This is the 19th consecutive month of growth in the New Orders Index.
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ISM's Employment Index registered 61.7 percent in January, which is 2.8 percentage points higher than the seasonally adjusted 58.9 percent reported in December. This is the 16th consecutive month of growth in manufacturing employment. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Click on graph for larger image in new window.

Here is a long term graph of the ISM manufacturing index.

This was a strong report and above expectations. The new orders and employment indexes were especially strong.

by Calculated Risk on 2/01/2011 08:30:00 AM

The advance Q4 GDP report released last Friday showed a small annualized real increase of 0.8% for investment in non-residential structures. This broke a streak of nine straight quarterly declines. Note: this gain might be revised away.

With the release of underlying detail data yesterday - we can see that the reported small gain for non-residential structure investment in Q4 was mostly for power and petroleum mining structures.

If we look at just office, mall and lodging investment, non-residential structure investment continued to decline in Q4.

Click on graph for larger image in new graph gallery.

This graph shows investment in offices, malls and lodging as a percent of GDP. Office investment as a percent of GDP peaked at 0.46% in Q1 2008 and has declined sharply to a new series low as a percent of GDP (data series starts in 1959).

Investment in multimerchandise shopping structures (malls) peaked in 2007 and has fallen by two-thirds (note that investment includes remodels, so this will not fall to zero). Mall investment is also at a series low (as a percent of GDP).

The bubble boom in lodging investment was stunning. Lodging investment peaked at 0.32% of GDP in Q2 2008 and has fallen by over 70% already.

Notice that investment for all three categories typically falls for a year or two after the end of a recession, and then usually recovers very slowly (flat as a percent of GDP for 2 or 3 years). Something similar will probably happen again, and there will not be a recovery in these categories until the vacancy rates fall significantly.

The second graph is for Residential investment (RI) components. According to the Bureau of Economic Analysis (BEA), includes new single family structures, multifamily structures, home improvement, broker's commissions, and a few minor categories (dormitories, manufactured homes).

This graph shows the various components of RI as a percent of GDP for the last 50 years. Usually the most important components are investment in single family structures followed by home improvement.

Investment in home improvement was at a $151.6 billion Seasonally Adjusted Annual Rate (SAAR) in Q4 (about 1.0% of GDP), significantly above the level of investment in single family structures of $106.2 billion (SAAR) (or 0.7% of GDP).

Brokers' commissions increased slightly in Q4, but are near the lowest level (as a percent of GDP) since the early '80s. In dollar terms, brokers' commissions are back to the 1998 / 1999 levels.

And investment in multifamily structures has been bouncing along at a series low for the last few quarters, although this is expected to increase in 2011.

These graphs show there is currently very little investment in offices, malls and lodging - and also very little investment in most components of residential investment.

by Calculated Risk on 1/31/2011 11:54:00 PM

This is one of several industry specific indexes I track each month.

Click on graph for larger image in graph gallery.

Unfortunately the data for this index only goes back to 2002.

Note: Any reading above 100 shows expansion for this index.

From the National Restaurant Association (NRA): Restaurant Industry Entering 2011 on Positive Note, as Restaurant Performance Index Posted Strong Gain in December

Driven by expanding same-store sales and customer traffic levels as well as growing optimism among restaurant operators, the outlook for the restaurant industry improved in December. The National Restaurant Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.0 in December, up a strong 1.1 percent from its November level.
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For the third time in the last four months, restaurant operators reported a net increase in same-store sales. ... Restaurant operators also reported a net increase in customer traffic levels in December.