- Personal Spending for January rose .5% versus estimates of a .4% gain and a .7% increase in December.
- PCE Core for January rose .3% versus estimates of a .2% increase and a .1% gain in December.
- Initial Jobless Claims for last week rose to 338K versus estimates of 325K and 331K the prior week.
- Continuing Claims rose to 2640K versus estimates of 2520K and 2506K prior.
- ISM Manufacturing for February rose to 52.3 versus estimates of 50.0 and a reading of 49.3 in January.
- ISM Prices Paid for February rose to 59.0 versus estimates of 54.0 and a reading of 53.0 in January.
- Construction Spending for January fell -.8% versus estimates of a -.5% decline and an upwardly revised .6% increase in December.
BOTTOM LINE: Personal spending in the US increased more than forecast in January and incomes rose by the most since January 2006, Bloomberg reported. The surge in incomes may help to explain the Conference Board’s Consumer Confidence reading hitting cycle highs last month. The year-over-year PCE Core, the Fed’s favorite inflation gauge, rose 2.3%, well below last month’s Average Hourly Earnings’ increase of 4.0%. I expect personal spending and incomes to remain healthy over the intermediate-term as interest rates remain low, inflation decelerates, housing stabilizes at relatively high levels, stocks rise further, confidence increases and the job market remains healthy.
More Americans applied for state jobless benefits last week, and continuing claims rose, Bloomberg reported. The four-week moving-average of jobless claims rose to 335,250 from 327,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2% from 1.9% the prior week. While upcoming monthly job reports will likely weaken a bit, I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
Manufacturing in the US unexpectedly expanded by the most in five months in February, suggesting production is starting to stabilize, Bloomberg reported. The Orders to Be Filled Component surged to 51.5 from 43.5 the prior month. Manufactures have now pared inventories for seven straight months. Inventory de-stocking has been occurring at a very rapid rate. I expect manufacturing to improve meaningful over the course of the year as inventories are rebuilt and auto production rises.
Construction spending in the US fell by the most in three months in January, pulled lower by homebuilding and a jump the prior month, Bloomberg reported. Residential construction fell 19.1% at an annual rate during the fourth quarter as homebuilders sought to cut inventory. I continue to believe construction will remain muted throughout the year as homebuilders continue to slash inventory.
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