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Friday, February 27, 2015

Consumer Confidence Fell Slightly in February

Consumer sentiment fell slightly in February according to the University of Michigan survey, however levels remain near the 11 year high set the previous month. Although gas prices remained low, an unusually harsh winter suppressed shopping, contributing to a slight 2.7% decline in consumer confidence from January leaving the index at 95.4.
Consumers tend to be more optimistic about present conditions that future expectations, with the present condition index falling slightly to 106.9. Future expectations dropped three points from last month to 88, but remain high in comparison to last February’s level of 72.
Inflationary expectations have increased somewhat, but remain anchored. Consumers expect prices to rise 2.8 percent in the next year, up noticeably from 2.5% in January.

Fourth Quarter Growth Down from Initial Estimate

U.S. Real GDP for the fourth quarter increased at a rate of 2.2%, noticeably lower than the initial estimate of 2.6% and substantially lower than the 5% growth achieved in quarter three.



Consumption contributed 2.8% to growth, up from 2.2% in the third quarter, yet GDP fell due to a decrease in net exports and a decline in government spending.



Rising dollar values and weak oil prices contributed to the decline in exports. Net exports provided a drag of 1.2% on fourth quarter growth compared to a 0.8% boost in the third quarter. Government spending decreased lowering growth by 0.3%, largely due to a reduction in national defense spending which decreased by 12.4% compared to an increase of 16% in quarter three.

For the year as a whole, GDP increased by 2.4 percent reflecting positive contributions from personal consumption expenditures, nonresidential fixed investment, exports, state and local government spending and private inventory investment.

Read the BEA release.

Thursday, February 26, 2015

New Orders for Durable Goods Increased in January

New orders for durable manufactured goods increased 2.8% to $236.1 billion in January, according to the U.S. Census Bureau. This increase, up following two consecutive monthly decreases, followed a 3.7% decrease in December. Excluding transportation, new orders increased 0.3%.

Shipments of manufactured durable goods, down three of the last four months, decreased 1.1% to $245.1 billion, following a 1.5% increase in December.

Inventories of manufactured durable goods, up twenty-one of the last twenty-two months, increased 0.4% to $412.5 billion, and continues to be at an all-time high since the series was first published in 1992.



Read the U.S. Census Bureau release.

Energy Prices Continue to Drive CPI Decline

The Consumer Price Index declined 0.7% in January on a seasonally adjusted basis, as the price of gasoline continued to decline, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the CPI has decreased 0.1% before seasonal adjustment—notably lower than the 0.7% increase for the 12 months ending December and the first negative yearly change since October 2009.

The energy index fell 9.7% as the gasoline index fell 18.7% in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1% had the gasoline index been unchanged.



The index for all items less food and energy rose 0.2%. This index has risen 1.6% over the last 12 months. The shelter index rose 0.3% from December and 2.9% from January 2014.

The food index was unchanged after rising through all of 2014. The food at home index fell 0.2% in January after increasing in each of the last 6 months. The index for food away from home increased 0.2%, and has risen 3.1% over the last year.

Read the Bureau of Labor Statistics report.

Wednesday, February 25, 2015

New Home Sales Relatively Unchanged in January, Home Price Declined

Sales of new single-family houses in January were a seasonally adjusted annual rate of 481,000, according to the U.S. Census Bureau and Department of Housing and Urban Development. The January rate is 0.2% below the revised December rate of 482,000, yet 5.3% above the year-ago rate of 457,000.



New home sales in two of the four regions increased this month. Sales in the Midwest rose 19.2% and the South rose 19.2%, whereas the Northeast decreased 51.6% and the West dipped 0.8%.

The median sales price of new homes sold in January was $294.300, down 2.6% from December. The average price was $348,300, down 8% from December.

At the end of January, there were an estimated supply of 5.4 months at the current sales rate.

Read the Census report.

Tuesday, February 24, 2015

ABA Statement on FDIC’s Fourth Quarter Bank Earnings Report

“It was a strong year for America’s banking industry with significant increases in lending to both businesses and individuals. Community banks in particular showed dramatic improvements, which speak to strengthening economies in towns across America. The headline earnings disguise the robust improvements we’re seeing among banks of all sizes as institutions work to ensure businesses have the credit they need to expand and create jobs.”

Lending Grows Strongly for Banks in 2014

“Lending is on the rise, and we’re seeing strong improvements in business, consumer and real estate categories. Business lending saw a significant uptick, buoyed by a renewed appetite for expansion among small businesses. We’ve returned to a point where small businesses are confident in the economy, and banks are meeting their needs as they get back in the game.”

Banks See Solid Earnings

“Robust lending growth was the key driver of industry earnings in 2014. Expense control remains a high priority amid ever-rising regulatory costs, but has become more difficult as cost-cutting nears its limit and regulatory risk increases.”

Interest Rate Risk Remains Concern for Banks

“Banks remain sensitive to the increasing possibility that the Fed will begin to raise interest rates later this year, and are managing their risks accordingly. This is one of the many risks banks must manage as they work aggressively to meet their customers’ needs and make the loans that help drive our economy.”

Capital Keeping Pace with Industry Growth

“The industry has worked to aggressively build capital and liquidity over the last five years. The focus is now shifting toward putting capital to work in the form of loans and other investments in communities across the country. Total industry capital is now over $1.7 trillion, and with reserves banks have set aside for possible loan losses, there is a total buffer of more than $1.8 trillion protecting the industry from any economic circumstance that could arise.”

Deposit Insurance Fund Growing More Quickly than Anticipated

“The FDIC’s Deposit Insurance Fund grew over $8 billion in the fourth quarter to a total of nearly $63 billion dollars. This large quarterly increase is primarily due to failure costs being much lower than anticipated, which led to a recapture of funds that had been previously set aside to cover losses. The FDIC insurance fund is now larger than it has ever been, and will meet the congressionally mandated levels much sooner than had been expected. The Deposit Insurance Fund is paid for completely by the banking industry at no cost to taxpayers.”

2014 National Home Prices Grew Twice the Rate of Inflation

The 20-City Case-Shiller Composite gained 4.5% year-over-year in December, compared with a 4.3% gain in November. The 10-City Composite gained 4.3% in December from the previous year, up from 4.2% in November. The National Index recorded a 4.6% gain on an annual basis in December, down from a 4.7% gain in November.

On a monthly basis, the 10-City and 20-City Composites each posted slight increases of 0.1%, while the National Index declined 0.1%.



Month-over-month, nine cities posted price increases while six posted decreases. Chicago and Cleveland were the primary contributors to the monthly decline, decreasing 0.9% and 0.5%, respectively, offset by a 0.7% increase in Miami and a 0.5% increase in Denver.

Year-over-year, San Francisco increased 9.3%, the highest of the 20 cities, followed by 8.4% growth in Miami. Chicago reported the slowest year-over-year growth, increasing 1.3%, followed by a 1.5% increase in both Cleveland and Washington.

Read the S&P release.

Monday, February 23, 2015

Existing Home Sales Fall to 9-Month Low

Existing home sales fell 4.9% in January to a seasonally adjusted annual rate of 4.82 million, the lowest rate in nine months. Existing home sales in December was upwardly revised to a seasonally adjusted annual rate 5.07 million.



The median existing-home price increased 6.2% year-over-year to $199,600 in January, marking the 35th consecutive month of year-over-year price gains.

Total housing inventory increased 0.5% in January to 1.87 million homes available for sale, but declined 0.5% from January 2013. There is currently a 4.7-month supply of total existing homes available for sale, up from 4.4 months in December.

Existing home sales weakened in all four regions, posting month-over-month declines of 6.0% in the Northeast, 2.7% in the Midwest, 4.6% in the South and 7.1% in the West.

NAR Chief Economist Lawrence Yun noted: “January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows,” he said. “Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”

All-cash sales were 27% of transactions in January, one percentage point higher than in December yet 6 percentage points lower than January 2013.

First-time home buyers represent 28% of all buyers, the lowest level since June 2014 and down from 29% in December.

Read the NAR report.

Friday, February 20, 2015

FDIC Study: Bank Branches Shrink but Remain Prevalent

Although the number of bank branches has fallen over the past half-decade as mobile and online banking choices grow, branches remain a prevalent community fixture, the FDIC said in a study noting that "consumers continue to value and use physical banking offices."

The number of FDIC-insured bank branch offices has fallen 4.8% since 2009 to 94,725 in 2014, a decline that mirrors a similar dip in the early 1990s after the savings and loan crisis. The intervening 22.4% growth in branch totals — from 1994 to 2009 — was prompted in part by legislation that relaxed previous restrictions on branching, with large banks driving the increase in the mid-1990s as they expanded their retail footprints.

An ABA survey released last year showed branches making a small resurgence in popularity, with 21 — up three points from 2013 — of customers saying branches are their preferred banking method.

Read the FDIC study.
View ABA’s consumer preference survey.

Wednesday, February 18, 2015

Dovish FOMC Minutes Signals Fed Cautious on Rate Increase Timing

The Federal Open Market Committee (FOMC) minutes of the January 27-28 meeting signaled that the Fed will be cautious concerning the timing of the first federal funds rate increase and the rate of increases thereafter. Some Fed officials advised against raising the rates prematurely, noting concerns stemming from economies overseas. In particular, Fed officials pointed to slowed growth in China and the ECB announcement that it would expand its asset purchase program to include the purchase of sovereign bonds, which caused the euro to depreciate significantly against the dollar.

The FOMC settled on continuing to say that the Committee “can be patient” in beginning to normalize the stance of monetary policy. Members clarified that the decision to raise the federal funds rate would remain data dependent; faster progress towards the Committee’s dual mandate may warrant an increase in the federal funds rate sooner than anticipated, just as slower progress may justify waiting.

The Committee will continue to maintain accommodative financial conditions by reinvesting principal payments from its holdings of mortgage-backed securities and to roll over maturing Treasury securities at auction. After the first increase of the federal funds rate, Fed policy will likely remain highly accommodative for a time.

Fed officials reported that economic activity had been expanding at a solid pace, compared to the “moderate” pace at which the economy was expanding in the previous meeting. The labor market also improved from the previous meeting, as the FOMC labeled job gains as “strong” compared with “solid.” However, inflation fell further below the Committee’s long-term goal of 2%, primarily due to the decline in gas prices. The Committee notes that the low gas prices has had a positive expect for consumers by increasing their purchasing power.

Read the FOMC minutes.

Industrial Production Edged Up in January

Industrial production increased 0.2% in January after decreasing 0.3% in December. At 106.2% of its 2007 average, total industrial production was 4.8% above its level of a year earlier.

The capacity utilization rate for the industrial sector was unchanged at 79.7%, a rate that is 0.7 percentage point below its long-run (1972-2014) average.



Manufacturing output rose 0.2%, after remaining unchanged in December, to an annual rate of 5.6%. The production of durable goods advanced 0.4% and the production of nondurable goods was unchanged. The capacity rate for manufacturing increased 0.1 percentage points to 78.1%, 0.5 percentage points below its long-run average.

Mining output declined 1.0% after increasing 2.1% in December; the decline was more than accounted for by a substantial drop in the index for oil and gas well drilling and related support activities The utilization rate for mines fell 1 percentage point to 87.5%.

Utilities production rebounded, increasing 2.3% after falling 6.9% in December. The utilization rate for utilities climbed 1.8 percentage points to 78.2%.

Consumer goods increased 0.2% as a result of a gain of 2.3% for consumer energy products; the output of durable consumer goods decreased 1.0% and the production of non-energy nondurables was unchanged.

Read the Federal Reserve release.

Declining Gasoline Prices Continue to Cause Drop in Producer Prices

Producer prices continued to drop in January, falling 0.8%, seasonally adjusted, according to the U.S. Bureau of Labor Statistics. This was the seventh consecutive monthly decrease. The January decline in final demand prices is primarily due to a 2.1% decrease in the index for final demand goods.



Prices for final demand energy was the key factor in the decline, with the energy index falling 10.3% over the month. Gasoline prices led the decline in energy, which fell 24%.

Food prices also fell in January, dropping 1.1%. Final demand, excluding food, energy, and trade was up 0.1%.

The index for final demand services decreased 0.2% in January, the first decline since falling 0.3% in September 2014. In January, prices for final demand services less trade, transportation, and warehousing moved down 0.4%, and the index for final demand transportation and warehousing services dropped 0.8%. In contrast, margins for final demand trade services advanced 0.5%.

Read the BLS report.

Housing Starts Dip in January

Housing starts in January edged down to a seasonally adjusted annual rate of 1.065 million, 2.0% below the revised December estimate of 1.087 million, but 18.7% above the January 2014 rate of 897,000. Single-family housing starts grew at a rate of 678,000, 6.7% below the revised December figure of 727,000. The growth rate for multifamily units was 381,000, 12.1% above the revised December estimate of 340,000.



The rate of housing starts decelerated in three of the four regions. Housing starts in the Midwest decreased 22.2% to 140,000 total units, the largest decline of the four regions, followed by a 3.5% decrease to 111,000 units in the Northeast and a 3.4% decrease to 286,000 units in the West. The South, the only region to experience an acceleration in housing starts, increased 6.5% to 528,000 units.



Building permits were at a seasonally adjusted annual rate of 1.053 units, 0.7% below the revised December rate of 1.060, yet 8.1% above the year-ago estimate of 974,000. Building permits for single-family units were at a rate of 654,000, 3.1% below the December figure of 675,000. Building permits for multifamily units were 372,000, 3.3% above December’s revised rate of 360,000.

Housing completions in January were at a seasonally adjusted annual rate of 930,000, 1.3% above the revised December estimate of 918,000 and 9.4% above the year-ago rate of 850,000. Single-family housing completions were at a rate of 649,000, 2.3% below the revised December rate of 664,000. The January rate for multifamily units was 274,000, 10.5% higher than December’s revised rate of 248,000.

Read the Census release.

Tuesday, February 17, 2015

Homebuilder Sentiment Dips Amid Inclement Weather

Homebuilders confidence in the market for newly built single-family homes fell 2 points to 55 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The index has remained above the 50-point benchmark for eight consecutive months.

Two out of three components of the index posted losses in February. “Current sales conditions” edged down one point to 61 and “buyer traffic” fell 5 points to 39. However, “sales expectations in the next six months” remained unchanged at 60.

Regionally, the Northeast fell one point to 46 and the Midwest and South each fell two points to 54 and 57, respectively, while the West rose two points to 68.

Read the NAHB release.

Thursday, February 12, 2015

Retail Sales Continue to Slip as Gas Prices Decline

Retail and food service sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $439.8 billion, a decrease of 0.8% from the previous month, but 3.3% above January 2014, according to a report released by the U.S. Census Bureau. Falling gasoline prices continue to drive the decline.



Gasoline stations were down 9.3% from December and 23.5% from the previous year, as gas prices continued to decline. Retail trade sales were down 1.0% from December, but up 2.4% above last year. Food services and drinking places were up 11.3% from January 2014 and auto and other motor vehicle dealers were up 10.7% from last year

Read the Census report.

Tuesday, February 10, 2015

Small Business Optimism Dipped in January

The NFIB Small Business Optimism Index slipped 2.5 points in January, edging down to 97.9. Seven of the ten indices dropped, compared to December when eight of the ten indices posted gains. Expectations for the economy to improve led the decline. Current inventory and current job openings were the only two categories to post gains.



Expected business conditions drove most of the decline, falling 12 points (43%), followed by a 4 point (14%) decline in real sales and a 4 point (14%) decline in earnings. Current inventory and current job openings rose 2 points and one point, respectively. The expected credit conditions category was unchanged.

Government regulation and red tape was single most important problem for small businesses, followed by taxes. Financing and interest rates remained the least cited concern.

Read the NFIB report.

Monday, February 9, 2015

ABA Survey Shows FDIC Claims in Business Judgment Case Would Affect Board Recruitment

The FDIC is appealing a federal judge’s ruling rejecting the agency’s legal case against the directors and officers of a failed North Carolina community bank. Relying on North Carolina’s business judgment rule — which protects directors and officers from personal liability for decisions made in good faith and according to a rational process — the trial judge in FDIC v. Willetts dismissed the agency’s claims against the defendants.

The FDIC challenged the business judgment rule, arguing that the current standard for allowing personal liability claims, “gross negligence,” should be replaced with an “ordinary negligence” standard. ABA and the state groups argued that both federal and North Carolina legal precedents protect the business judgment rule, with numerous courts finding the rule necessary for attracting and retaining qualified directors and officers. They also pointed out that the FDIC's approach would increase unproductive litigation and, for bank customers, limit credit availability.

ABA submitted the results of a survey showing that bank directors and officers are deeply concerned about how changes to the business judgment rule could affect their service and their banks’ ability to extend credit.

The survey showed that nearly two-thirds of directors and officers are “very concerned” about the potential for personal liability in their business decisions — with an additional third “somewhat concerned.” Eighty-four percent said that that changes to personal liability would make them less willing to serve as a director or officer in the future.

For banks, these concerns have affected director and officer recruitment more than retention. One in five said they have had difficulty retaining directors over these concerns, while 40% said a candidate had declined a director or officer role at their bank for these reasons.

Three quarters of directors and officers projected that if the business judgment rule is changed, loan administration and evaluation costs will go up as boards devote much greater scrutiny to credit decisions. The result: less credit for underserved markets, according to 76%, and less credit for borrowers with no credit history, according to 80%.

View the survey results.
Read the brief.

Friday, February 6, 2015

Consumer Credit Grew 5.4% (SAAR) in December

Consumer credit increased at a seasonally adjusted annual rate of 5.4% in December to $3.3 trillion. Revolving credit growth grew 8.1% (to $888 billion) and non-revolving credit grew 4.6% (to $2.4 trillion).



Total outstanding consumer credit increased by $14.8 billion. Total outstanding non-revolving credit increased by $9 billion, while total outstanding revolving credit decreased by $5.8 billion.



Federal Government holdings of student loans continue to be the largest portion of non-revolving credit, making up 35% of outstanding credit. Finance companies and depository institutions are the secondary and tertiary holders of non-revolving credit, holding 26% and 25%, respectively. Depository institutions continue to be the primary holder of revolving credit, holding 82%.

Read the Federal Reserve release.

Economy Added 257,000 Jobs in January, Unemployment Rate 5.7%

Total nonfarm payroll employment rose by 257,000 in January. The unemployment rate edged up 0.1 percentage point to 5.7%, as more workers joined the labor market. Both the November and December readings were revised upward by 70,000 and 77,000 respectively, for a significant net gain of 147,000 more jobs. Monthly gains averaged 336,000 over the past three months.



Job gains occurred in retail trade (46,000 jobs), construction (39,000 jobs), health care (38,000 jobs), financial activities (26,000 jobs) and manufacturing (22,000 jobs).

The civilian labor force participation rate edged up by 0.2 percentage point to 62.9% in January, regaining the 0.2 percentage point loss in December.



Average hourly earnings increased by 12 cents, following a 5 cent decrease in December. Over the year, average hourly earnings have risen by 2.2%.

The number of long term-term unemployed, those jobless for 27 weeks or more, remained essentially flat at 2.8 million. This group, which accounts for 31.5% of the unemployed, declined by 828,000 in the past 12 months. The number of involuntary part-time workers, individuals employed part time for economic reasons, was little changed this month at 6.8 million.

Read the BLS release.

Thursday, February 5, 2015

U.S. Foreign Trade Deficit Widened in December as Petro Deficit Grew

The U.S. international trade deficit in goods and services increased $6.8 billion to $46.6 billion in December, due to an increase in the petroleum deficit.

The goods deficit rose by $6.9 billion to $66.0 billion, the service surplus increased $100 million to $19.5 billion, and the petroleum deficit widened $3.1 billion to $14.7 billion.

Exports decreased by $1.5 billion to $194.9 billion, primarily due to a $2.1 billion decline in goods exports driven by lower industrial supplies and materials. Exports of services increased $1.0 billion to $60.6 billion.



Imports increased by $5.2 billion to $241.4 billion, primarily driven by a $4.4 billion increase in goods imports to $200.3 billion. The increase was driven by a $2.7 billion increase in industrial supplies and materials imports. Imports of services increased $900 million to $41.2 billion.

For 2014, the goods and services deficit was $505.0 billion, up $28.7 billion from $476.4 billion in 2013. Exports were $2,345.4 billion in 2014, up $65.2 billion from 2013. Imports were $2,850.5 billion in 2014, up $93.9 billion from 2013.

The deficit with China increased by $23.9 billion to $342.6 billion in 2014, as imports increased to nearly four times the value of exports.

Read the Census Bureau release.
Read the full report.

Wednesday, February 4, 2015

Non-Manufacturing ISM Index Increased in January

The Non-Manufacturing ISM Report on Business Index was 56.7 in January, 0.2 percentage points above the previous month. Index readings above 50 indicate expansion in the non-manufacturing economy. January was the 60th consecutive month of economic growth. Eight industries reported growth in January, while eight industries— Mining; Arts, Entertainment & Recreation; Construction; Other Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Educational Services; and Transportation & Warehousing—contracted.



The Business Activity Index was 61.5, 2.9 percentage points faster than the previous month. Respondents attributed the growth to “mild weather and lower gas prices” and “new products introduction.”

The Employment Index was 51.6, 4.1 percentage points lower than the previous month. Survey respondents note that “general decline in revenue year-over-year has caused some cutbacks in our labor force.”

The New Orders Index was 59.5, 0.3 percentage points faster than December. Respondents reported the continued growth was driven by “new budgets” and “increased orders and/or prospects.”

The Supplier Deliveries Index was 54.0, 1.5 percentage points higher than the previous month, albeit at a slower growth rate than previously observed. No industry reported faster deliveries, eight reported no change, and 10 reported slower deliveries.

Prices paid decreased for the second time in 63 months, falling from 49.8 to 45.5. Ten industries reported a decline in prices and six reported an increase.

Read the ISM Release.

ADP: Private Sector Added 213,000 Jobs in January

According to the ADP National Employment report, the private sector added 213,000 jobs in January, 40,000 fewer than December, as both goods-producing and services sectors experienced decreased growth compared to the previous month. The January report upwardly revised the December and November headline numbers by 12,000 and 47,000 jobs, respectively.



Small businesses, companies with fewer than 49 employees, added 78,000 jobs, 37,000 fewer than in December. Medium businesses, companies with 50 to 499 employees, added 95,000 jobs, 17,000 more than in December. Large businesses, companies with greater than 500 employees, added 40,000 jobs in January, down from 61,000 jobs added in December.

Goods-producing employment rose by 31,000 jobs, a 16,000 job decrease from the previous month, as construction and manufacturing added a combined 32,000 jobs, 17,000 less than December.

The service-providing sector employment rose by 183,000 jobs, down from 207,000 in December. The slower growth in the service sector was primarily due to decreased job growth in the professional/business services and financial activities sectors, which added 42,000 jobs and 11,000 jobs, respectively, partially offset by an increase in trade/transportation/utilities, which added 54,000 jobs compared with 40,000 in December.

Read the ADP release.

Monday, February 2, 2015

President Releases 2016 Budget: Middle Class Economics

President Obama released the 2016 Budget Proposal, a $4 trillion budget subtitled “Middle Class Economics.” This year’s budget proposal includes tax cuts and spending programs aimed at increasing support to working families by raising taxes and closing tax loopholes on multinational corporations and capital gains.

The budget would impose a new fee on large, highly-leveraged financial institutions. Specifically, the Budget would raise $112 billion over 10 years by imposing a seven basis point fee on the liabilities of large U.S. financial firms — the roughly 100 firms with assets over $50 billion. The administration proposed this tax as a policy that prevents future financial crises by disincentivizing banks from becoming excessively leveraged, noting that the fee would improve economic stability by attaching a direct cost to leverage for large firms. The proposal continues: “The fee will also satisfy the statutory requirement for the President to propose a means to recoup any remaining costs of assistance provided through the Department of the Treasury’s Troubled Asset Relief Program.”

Read the President’s 2016 Budget proposal.

Bank Lending Standards Ease Slightly

Over the past three months, banks eased lending standards to all business types, according to the January Federal Reserve’s Senior Loan Officer Survey.

On net, 5.5% of the responding banks reported easing standards for commercial and industrial (C&I) lending to large and medium sized borrowers, and 89% said lending standards remained basically unchanged. For small business loans, 5.7% of banks loosened standards and 91.4% said lending standards remained unchanged. During the period, a net 17.9% of banks reported stronger loan demand for medium-to-large borrowers and a net 5.7% reported stronger demand from small borrowers; similarly, respondents experienced stronger demand for all three categories of CRE loans covered in the survey.

Regarding loans to households, the January survey featured revised and expanded categories of residential real estate loans to reflect the CFPB’s qualified mortgage (QM) rules and provide more detailed information on the mortgage market. For residential mortgages categorized as QM, non-jumbo, non-GSE eligible, on net, 3.4% of banks have eased lending standards somewhat and 13.8% of banks found that demand was moderately weaker. For residential mortgages categorized as GSE-eligible, on net, 12.5% of banks eased standards somewhat and 18.7% of banks found that demand was moderately weaker.

Read the Federal Reserve release.

Construction Spending Increased in December

Construction spending increased 0.4% in December on a seasonally adjusted basis. Year-over-year construction spending increased 2.2%.



Private residential construction grew 0.3%, as single family construction grew 1.2% and multi-family construction grew 0.3%.

Non-residential construction edged down 0.2% in December, yet was 5.3% above the year-ago level.

The value of private construction in 2014 was $687.0 billion, 7.2% above the $641.1 billion spent in 2013.

Public construction rose 1.1% from November and 6.7% from the year-ago level. The value of public construction in 2014 was $274.4 billion, 1.8% above the $269.6 billion spent in 2013.

Read the Census report.

ISM Manufacturing Index Expanding More Slowly

The ISM manufacturing index dipped 1.6 percentage points to 53.5 in January, the lowest reading in the past year. Index readings above 50 indicate expansion in the manufacturing economy. As of January, the index has been expanding for 20 consecutive months, although the pace has declined. Of the 18 manufacturing industries indexed, 14 reported growth in January.



The New Orders Index declined 4.9 points to 52.9, but the Inventory Index increased 5.5 point to 51.0. The gap between New Orders and Inventories—a proxy for future production—narrowed 10.4 points to 1.9 points.

The Employment Index decreased 1.9 points to 54.1. This is the 19th consecutive quarter of growth in employment. Nine of the 18 manufacturing industries indexed reported growth in employment. Four industries reported a decrease: Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; and Machinery.

Exports declined 2.5 points to 49.5, contracting after growing for 25 consecutive months. Imports increased 0.5 points to 55.5.

Prices dropped 3.5 percentage points to 35.0. This is the third month in a row that the index is reporting a decrease in the price of raw materials.

Read the ISM release.

Personal Income Increased, Expenditures Decreased

Personal income increased $41.3 billion, or 0.3%, in December according to the Bureau of Economic Analysis, compared to a 0.3% increase the previous month. Personal consumption expenditures (PCE) decreased $40.0 billion, or 0.3% in December, after a 0.5% increase in November.

Disposable personal income — personal income less personal current taxes — increased $35.8 billion, or 0.3% in December.

The personal savings rate rose 0.6 percentage points to 4.9%.



The price index for PCE decreased 0.2% in December, consistent with November. The PCE price index, excluding food and energy, was unchanged for the second consecutive month.

Private wages and salaries increased $4.9 billion in December, compared with an increase of $40.6 billion in November. Goods-producing industries’ payrolls decreased $2.5 billion, manufacturing payrolls decreased $2.4 billion, service-producing industries’ payrolls increased $7.4 billion and government wages and salaries increased $1.9 billion.

Supplements to wages and salaries increased in December, rising $3.3 billion, compared with an increase of $5.6 billion in November. Proprietors’ income increased $12.8 billion, in contrast to a decrease of $3.3 billion in November.

Read the BEA release.