Friday, January 29, 2016

GDP Growth slowed to 0.7 Percent in Fourth Quarter

Real GDP for the fourth quarter grew at an annual rate of 0.7 percent according to the Bureau of Economic Analysis’s advance estimate, down from the third quarter’s growth rate of 2.0 percent. The fourth quarter’s slower growth was due to negative contributions from private inventory, non-residential fixed investment and exports, as well as lower positive contributions from personal consumption expenditures and government.

Consumption was the largest contributor to GDP, accounting for 1.46 percent of growth, down from 2.04 percent during the third quarter. Consumption spending increased by $60.1 billion in the fourth quarter, compared with an $83.5 billion increase in the third quarter.

Net exports were the largest drag on GDP growth, subtracting 0.47 percent from the total. Exports of goods and services fell $13.2 billion, while imports increased by $7.1 billion. Private inventories and private domestic investment also dragged on GDP, subtracting 0.45 percent and 0.41 percent from totals.

Government spending increased during the quarter, contributing 0.12 percent to GDP. The majority of the contribution was due to federal spending, which increased by $7.5 billion.

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Thursday, January 28, 2016

Durable Goods Orders Fell 5.1 Percent in December

New orders for manufactured durable goods fell 5.1 percent to $225.4 billion in December, according to the U.S. Census Bureau. The December decrease followed a 0.5 percent decrease in November. The majority of the month’s decrease was due to a drop in new orders for transportation equipment, which slipped by 12.4 percent. Excluding transportation, new orders decreased 1.2 percent. Over the course of 2015, new orders for durable goods fell 3.5 percent.

New orders excluding defense fell 2.9 percent on the month, as orders of non-defense capital goods fell 15.0 percent. Year-to-date, new orders of non-defense capital goods are down 11.0 percent.

Shipments of manufactured durable goods, down two of the last three months, fell 2.2 percent to $235.8 billion, following a 0.6 percent November increase.

Inventories of manufactured durable goods increased for the first time in six months, rising 0.5 percent to $397.9 billion following a 0.2 percent decrease in November.

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Wednesday, January 27, 2016

Fed Holds Steady in January Meeting

The Federal Reserve Open Market Committee (FOMC) decided to maintain the current target for the federal funds rate at 25-50 basis points, as the stance of monetary policy remains accommodative.

In a post meeting statement, the Committee again noted strong job gains and additional decline in labor force underutilization, as well as moderate increases in household spending, business fixed investment and housing.

Concern was expressed that net exports have softened and inventory investment has slowed. Inflation continues to run well below the 2 percent long-run objective, partly reflecting lower energy prices and prices of non-energy imports.

The statement also noted that the Committee is closely monitoring global economic and financial developments, and their implications for the labor market and inflation. The line in the December press release, stating that the risks to the Fed’s outlook were “balanced” was removed from today’s release.

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New Home Sales Grew in December

Sales of new single family homes rose in December to a seasonally adjusted annual rate of 544,000, according to the U.S. Census Bureau and Department of Housing and Urban Development. The December rate is 10.8 percent above the revised November rate of 491,000 and is 9.9 percent above the year ago rate of 495,000.

New home sales increased in all four regions, rising 31.6 percent in the Midwest, 21.0 percent in the West, 20.8 percent in the Northeast, and 0.4 percent in the South.

The median sales price of new houses was $288,900, down from $297,000 in November. The average price was $346,400, down from $364,200 in the previous month.

At the end of December, there was an estimated supply of 5.2 months at the current sales rate, down from a 5.6 month supply in November.

An estimated 501,000 new homes were sold during 2015, a 14.5 percent increase from sales in 2014.

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Tuesday, January 26, 2016

Consumer Confidence Improves for Second Consecutive Month

The Conference Board’s Consumer Confidence Index improved in January, rising 1.8 points to 98.1, the second consecutive monthly increase.

The Present Situation Index was unchanged in January at 116.4, while the Expectations Index increased 2.9 points to 85.9.

“Consumer confidence improved slightly in January, following an increase in December,” says Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions held steady, while their expectations for the next six months improved moderately. For now, consumers do not foresee the volatility in financial markets as having a negative impact on the economy.”

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Home Prices Continue Upward Trend

The 20-City Case-Shiller Composite Index increased 5.8 percent year-over-year in November, up from October’s gain of 5.5 percent. The 10-City Composite increased 5.3 percent from the previous year, up from a 5.0 percent annual increase last month. The National Index, which covers all nine census divisions increased by 5.3 percent, compared to a 5.1 percent increase in October.

On a seasonally adjusted monthly basis, the National Index, along with the 10-City and 20-City Composites each posted month-over-month gains of 0.9 percent.

Home prices in five major cities declined on a monthly basis, with prices falling by 0.7 percent in Chicago, 0.5 percent in Boston, 0.3 percent in Atlanta and New York, and 0.1 percent in Las Vegas. Miami posted the highest monthly gain, with prices increasing by 0.8 percent.

“Housing prices continue to recover from the collapse that began before the recession of 2007-2009 and continued until 2012,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market. Sales of existing homes were up 6.5 percent in 2015 vs. 2014, and the number of homes on the market averaged about a 4.8 months’ supply during the year; both numbers suggest a seller’s market.”

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Friday, January 22, 2016

Existing Home Sales Bounced Back in December

Existing home sales rebounded in December, rising 14.7 percent to a seasonally adjusted annual rate of 5.46 million in December according to the National Association of Realtors (NAR). December’s reading is a significant increase from November’s rate of 4.76 million. The NAR report attributes the increase to the rollout of the Know Before You Owe initiative, which pushed a portion of November’s transactions into the December period.

“While the carryover of November’s delayed transactions into December contributed greatly to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015,” said NAR Chief Economist Lawrence Yun. “Additionally, the prospect of higher mortgage rates in coming months and warm November and December weather allowed more homes to close before the end of the year.”

Sales of existing homes increased across all regions, rising 23.2 percent in the West, 14.6 percent in the South, 10.9 percent in the Midwest, and 8.7 percent in the Northeast.

The median existing home price increased to $226,000 in December, an 8.0 percent increase from December 2014.

Distressed sales fell 1 point to 8 percent in December. Six percent of December sales were foreclosures and 2 percent were short sales. Foreclosures sold at an average discount of 16 percent below market rates, while short sales were discounted at 15 percent.

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Wednesday, January 20, 2016

Energy Prices Bring Down CPI in December

The Consumer Price Index fell 0.1 percent in December, largely due to declines in the indexes for both energy and food. Over the last 12 months however, the index for all items increased 0.7 percent before seasonal adjustment.

The energy index fell 2.4 percent as all major energy components declined. The index for fuel oil fell most sharply at 7.8 percent on the month. Over the past 12 months, energy prices have fallen 12.6 percent on an unadjusted basis.

Prices for all items less food and energy items increased 0.1 percent, 10 basis points below November’s increase. The indexes for used cars and trucks, shelter, transportation and medical care services rose, while new vehicles, apparel and medical care commodities fell.

The food index also dipped in December, falling 0.2 percent as the index for food at home decreased 0.5 percent. Over the past year the food index has increased 0.8 percent on an unadjusted basis.

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Housing Starts Dipped in December

Housing starts fell in December to a seasonally adjusted annual rate of 1.149 million, 2.5 percent below the revised November estimate of 1.179 million, but 6.4 percent above the December 2014 rate. Housing starts have remained above the 1.0 million rate for nine consecutive months.

Housing activity was mixed across regions, rising 24.4 percent in the Northeast, but falling 3.3 percent in the South, 7.6 percent in the West and 12.4 percent in the Midwest.

New building permits also fell in December, dropping 3.9 percent below the November rate to 1.232 million, but grew 14.4 percent from December 2014.

Housing completions in December were at a seasonally adjusted annual rate of 1.013 million, a 5.6 percent monthly increase, and a 7.9 percent increase from a year ago.

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Tuesday, January 19, 2016

Builder Confidence Unchanged in January

The National Association of Home Builders/Wells Fargo Housing Market Index held steady at 60 points in January, unchanged from December’s downwardly revised reading.

“After eight months hovering in the low 60’s, builder sentiment is reflecting that many markets continue to show a gradual improvement, which should bode well for future home sales in the year ahead,” said NAHB Chairman and home builder, Tom Woods.

The index components were mixed in January, as current sales conditions rose two points to 67, while sales expectations in the next six months fell three points to 63. The buyer traffic component fell two points to 44.

“January’s HMI reading is right in line with our forecast of modest growth for housing,” said NAHB Chief Economist David Crowe. “The economic outlook remains promising, as consumers regain confidence and home values increase, which will help the housing market move forward.”

The three-month moving averages for regional HMI scores declined. The South fell 2 points to 61, while the Northeast, Midwest, and West regions fell 1 point each to 49, 57, and 75.

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Friday, January 15, 2016

Industrial Production Down Again in December

Industrial production declined 0.4 percent in December, a third consecutive monthly decline. Total industrial production is now 1.8 percent below the year ago level.

Manufacturing output slipped by 0.1 percent in December, amid a decline in nondurable goods production. Despite monthly declines for four of the last five months, factory output is 0.8 percent higher than a year ago.

Mining output fell 0.8 percent in December, marking the fourth consecutive monthly decline. Much of the decrease was due to a large drop in coal mining. Mining output is now 11.2 percent below year ago levels.

Capacity utilization slipped 76.5 percent, down 40 basis points from November and 3.6 percentage points below its long-run average.

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Producer Prices Fell in December

Producer prices decreased 0.2 percent in December, seasonally adjusted, after rising 0.3 percent in November, according to the U.S. Bureau of Labor Statistics. December’s decrease was attributable to a decline in prices for final demand goods.

Prices for final demand goods fell 0.7 percent, the sixth consecutive month of decreases. Over 75 percent of the decline could be traced to energy prices, which fell 3.4 percent. In addition, prices for final demand foods decreased 1.3 percent in December.

The index for final demand services moved up 0.1 percent. The increase could be traced to a 0.4 percent increase in prices for final demand services excluding trade, transportation, and warehousing. Conversely, prices for trade, transportation, and warehousing fell 0.4 percent in December.

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Retail Sales Fell 0.1 Percent in December

There were $448.1 billion of retail and food service sales in December (after adjustment for seasonal variation and holiday and trading-day differences, but not for price changes), a monthly decrease of 0.1 percent, according to the U.S. Census Bureau. Retail sales alone increased 2.2 percent from December 2014 however.

Core retail sales – excluding automobiles and parts – also declined 0.1 percent last month, following a 0.3 percent November increase. Year-over-year sales excluding automobiles and parts increased 1.2 percent. Retail trade sales fell 0.2 percent on the month, but increased 1.6 percent from a year ago.

Sales at clothing and clothing accessories stores contracted in December, falling 0.9 percent. Miscellaneous store retail sales fell 2.0 percent on the month, but increased 1.9 percent from a year ago. Sales at gasoline stations continued to decline, falling 1.1 percent on the month. Gas station sales fell 19.4 percent in 2015.

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Wednesday, January 13, 2016

Beige Book: Labor Markets Improved, Consumer Spending Picked Up

Economic activity expanded across most of the twelve Federal Reserve Districts according to the January edition of the Federal Reserve Beige Book. Nine Districts reported moderate to modest growth, while conditions in the New York and Kansas City Districts were essentially flat.

Labor markets continued to improve. The Richmond District reported moderate employment increases, while Philadelphia, Chicago and Dallas reported slight to modest job growth. In New York, Cleveland, Atlanta and Minneapolis, labor markets were described as tight or tightening. Seven Districts noted greater wage pressure for both skilled and unskilled workers, citing pressure from both state minimum wage laws and high turnover among entry-level positions.

Banking conditions were positive as lending activity and loan demand increased during the period. Philadelphia reported strong loan growth for autos, CRE and C&I lending. San Francisco also saw increased auto lending, along with an increase in mortgages. Several Districts reported improved credit quality, along with declining delinquencies.

Consumer spending picked up through the holiday season, with growth ranging from slight to strong depending on the region. Unseasonably warm weather was blamed for dampening sales in several Districts. Auto sales continued to be positive, with many District contacts attributing the increase in sales to lower gas prices.

Manufacturing activity was mixed, Cleveland, Richmond and Chicago reported modest to moderate manufacturing growth, while nearly half of the Districts reported declines. Some Districts noted the strong dollar’s negative impact on exports was not offset by the savings from low energy prices. Motor vehicle and motor vehicle parts also experienced strong demand.

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Tuesday, January 12, 2016

Small Business Optimism Increased Slightly in December

The NFIB small business optimism index rose 0.4 points to 95.2 in December. Six of the ten index components posted a gain on the month, while three components posted declines.

Labor market conditions weakened slightly, as the average employment gain per firm fell from 0.01 workers in November to -0.07 in December. Fifty-five percent of business owners reported hiring or trying to hire, while 48 percent reported few or no qualified applicants for their available positions. A seasonally adjusted net 15 percent of owners plan to create new jobs, up 4 points from November.

The percent of owners reporting increased sales in the past three months was unchanged at a net negative 5 percent. Eleven percent of small business owners reported weak sales as their top business problem, up from 9 percent in November.

Inflation slowed, as the net percent of owners raising prices was negative 4 percent. Owners seem to have cut prices to reduce inventory and boost sales.

Credit conditions remained satisfactory, as 4 percent of owners reported that all their borrowing needs were not met. Fifty-two percent of respondents explicitly stated that they did not want a loan, unchanged from November. Just 2 percent of owners cited financing as their top business problem, compared to 5 percent during the great recession.

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Friday, January 8, 2016

Consumer Credit Grew 4.8 Percent (SAAR) in November

Consumer credit increased in November at a seasonally adjusted annual rate of 4.8 percent, rising to $3.53 trillion. Revolving credit rose at an annual rate of 7.4 percent to $929 billion, and non-revolving credit increased at an annual rate of 3.8 percent to $2.60 trillion.

Total outstanding consumer credit increased $14.0 billion, down from a $15.6 billion increase in October. Total outstanding non-revolving credit increased by $8.3 billion, down from last month’s increase of $15.5 billion. Outstanding revolving credit grew by $5.7 billion, after remaining virtually unchanged in October.

Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising 36 percent of outstanding credit. Depository and institutions and finance companies are the secondary and tertiary holders, holding 25 percent and 24 percent of outstanding non-revolving credit.

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292,000 Jobs Added in December, Unemployment Unchanged at 5.0 Percent

Total nonfarm payroll employment rose by 292,000 in December, up from last month’s downwardly revised figure of 252,000 jobs. The national unemployment rate remained unchanged at 5.0 percent.

The services sector added 247 jobs, up from 213 jobs in November. Gains were led by the professional and business services industry, which added 73,000 jobs, up from a gain of 21,000 in November. Healthcare and social assistance followed with 52,600 jobs added, up from 39,800 in the previous month. Construction added 45,000 jobs, down from 48,000 added in November. On the year, the construction industry added 263,000 jobs, compared with a gain of 338,000 in 2014.

Among the service providing industries, the food services and drinking places segment had a strong year, adding 357,000 jobs in 2015. The segment added 37,000 jobs in December.

Goods producing industries added 45,000 jobs a whole, as gains from construction and nondurable goods offset contraction in the durable goods, mining and logging industries. The mining industry lost 129,000 jobs in 2015, after gaining 41,000 in 2014.

The civilian labor force participation rate was little changed at 62.6 percent in December. The number of long-term unemployed, those jobless for 27 weeks or more was also little changed at 2.1 million and accounted for 26.3 percent of the unemployed. The number of discouraged workers, those who gave up looking for work, was 663,000, little changed from a year ago.

Average hourly earnings slipped 1 cent to $25.24, following a 5 cent gain in November. Year-over-year, hourly earnings grew 2.5 percent.

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Thursday, January 7, 2016

December Job Cuts Reach 15-Year Low

Employers announced plans to cut 23,622 jobs in December, the lowest number of planned layoffs since June 2000, according to a report issued by Challenger, Gray & Christmas. December’s announced job cuts were 24 percent lower than November’s, and 28 percent lower than a year ago. In addition, the month’s job cuts represent the lowest December total on record since monthly tracking began in 1993.

“It used to be that companies would not hesitate to announce job cuts around the holidays. In fact, the heaviest job-cut period of the year was often in the closing months,” said John A. Challenger, CEO of Challenger Gray & Christmas. “However that appears to have changed in the wake of the Great Recession.”

During 2015, employers announced 598,510 cuts, up 24 percent from 2014 and the heaviest cuts since 2011. The energy sector led cuts in 2015, announcing 94,409 layoffs, nearly seven times more than the cuts announced in 2014. The military sector followed with 70,029 planned cuts, 57,000 of which were announced in July.

“We are at the point in this economic expansion where we could see a lot of volatility as companies make strategic moves to make the most of growth opportunities. That could mean more mergers, more leadership changes and more movement of resources from weak business lines to those with more promise.”

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Wednesday, January 6, 2016

FOMC Minutes: Labor Market Has Improved, Inflation Still Below Target

In the minutes of their December 15 –16th Federal Open Market Committee (FOMC) meeting, Fed officials justified their decision to raise the federal funds rate, citing a range of labor market, and domestic and foreign developments.

In terms of the size and timing of future rate hikes, members expect economic conditions to warrant only gradual increases in the federal funds rate. Based on current conditions, they anticipate that the rate will remain below long-run median estimates for some time.

Members agreed that the labor market had shown further improvement and confirmed that underutilization of labor markets had “diminished appreciably” since early this year. Members also anticipated that economic activity was likely to continue to expand at a pace sufficient to lead to a further increase in utilization of labor resources.

Inflation continued to run below the Committee’s long term objective as both energy and non-energy import prices declined. Members believed that the further decline in oil prices during the intermeeting period was likely to exert “additional transitory downward pressure” on inflation in the near term. The medium term outlook was more optimistic, as most members expected inflation to increase gradually as energy prices stabilize and the labor market strengthens. Some members were more cautious, believing that the risks to their inflation forecasts were “considerable,” as the risks of downward shocks in oil prices, or a sustained rise in the value of the dollar could affect inflation expectations.

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ISM: Non-Manufacturing Sector Continues Expansion

The ISM Non-Manufacturing Business Index fell slightly to 55.3 in December, 0.6 points below November’s reading. Despite the drop, December marked the 77th consecutive month of growth, as indicated by readings over 50. Eleven non-manufacturing industries reported growth in December, while 5 reported contractions.

The Business Activity Index increased 0.5 points to 58.7. Most respondents reported increased business activity and some reported new sales from overseas.

Non-manufacturing employment grew at a faster rate in December, as the Employment Index increased 0.7 points to 55.7. Nine industries reported an increase in employment, including management of companies and support services, retail trade, mining and healthcare and social assistance. Four industries, arts entertainment and recreation, other services, utilities and wholesale trade, reported contraction.

The New Orders Index registered 58.2, up 0.7 points from November. Respondents reported business expansion, as well as new projects coming on line.

Supplier deliveries picked up speed in December, as the index fell 4.5 points to 48.5 (reading above 50 for this index indicate slower deliveries). Six industries reported slower deliveries, while seven including information, mining and transportation and warehousing, reported faster deliveries.

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Manufactured Goods Orders Down 0.2 Percent in November

New orders for manufactured goods fell 0.2 percent to $472.2 billion in November following a 1.3 percent increase in October, according to the U.S. Census Bureau. Excluding transportation, new orders fell 0.3 percent to $390.4 billion.

New orders for manufactured durable goods were virtually unchanged, decreasing less than $0.1 billion to $238.6 billion, following a 2.8 percent increase in October. New orders for primary metals drove the decrease falling 2.9 percent to $19.5 billion, as orders from iron and steel mills fell 5.8 percent.

Shipments of manufactured goods increased 0.2 percent to $475.3 billion, following a 0.7 percent decrease in October. Shipments excluding transportation declined 0.3 percent, consistent with the previous month. Shipments of durable goods rose 0.8 percent to $241.7 billion, following a 1.2 percent decline in October.

Read the Census release.

U.S. Foreign Trade Deficit Narrowed in November

The U.S. international trade deficit narrowed slightly in November to $42.4 billion, down $2.2 billion from October. The narrowing of the trade balance was driven by a decline in imports, which fell $3.8 billion to $224.6 billion. Exports added to the deficit, declining by $1.6 billion to $182.2 billion.

The goods deficit decreased $2.3 billion to $61.3 billion, while the services surplus decreased $0.1 billion to $18.9 billion. The petroleum deficit rose $0.9 billion to $5.4 billion.

Exports of goods decreased $1.4 billion to $122.2 billion in November, driven by decreases in demand for industrial supplies and consumer goods. Demand for cell phones and other household goods decreased by $0.3 billion. Exports of services decreased $0.1 billion to $60.0 billion, largely due to a decline in freight and port services, and passenger fares. Exports of government goods and services also decreased.

Imports of goods fell $3.7 billion to $183.5 billion, as imports of consumer goods fell by $3.0 billion. Imports of services fell by $0.1 billion to $41.1 billion, due to a decrease in travel services.

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ADP: 257,000 Jobs Added in December

According to the ADP National Employment Report, the non-farm private sector added 257,000 jobs in December, up from 211,000 jobs in November. The majority of December’s jobs were created in the Services Sector, which saw the strongest gains since November of 2014.

“Strong job growth shows no signs of abating,” said Mark Zandi, chief economist of Moody’s Analytics. “The only industry shedding jobs is energy. If this pace of job growth is sustained, which seems likely, the economy will be back to full employment by mid-year. This is a significant achievement, given that the last time the economy was at full employment was nearly a decade ago.”

Small businesses, businesses with less than 50 employees, added 95,000 jobs in December, compared to 72,000 in November. Medium-sized businesses with 50-499 employees added 65,000 jobs, up from 59,000 added in November. Large businesses added 97,000 employees, up from 80,000 during November.

Goods producing employment rose by 23,000 jobs after declining by 2,000 last month. Construction jobs grew by 24,000, nearly 5 times November’s rate. Manufacturing jobs increased by only 2,000.

Service providing jobs grew by 234,000, largely due to expansion in the professional and business services sector, which increased by 66,000. The trade transportation and utilities sector posted an increase of 38,000 jobs, down slightly from the 41,000 reported in November. Financial activities jobs increased by 13,000, consistent with the previous three months.

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Monday, January 4, 2016

Manufacturing Industry Contracts for Second Consecutive Month

The ISM Manufacturing Index fell to 48.2 points in December – down 0.4 points from November’s reading. December’s reading marked only the second monthly contraction since November 2012, as readings below 50 indicate contraction in the manufacturing industry. Of the eighteen industries, six reported expansion, while ten reported contraction for December. Business sentiment was mixed as low oil prices negatively impacted some industries while benefiting others.

The Employment Index fell 3.2 points from November to 48.1, indicating a decline in employment growth. Seven of the eighteen industries reported growth, while nine industries, including apparel, leather and allied products, petroleum and coal, primary metals, and transportation equipment, reported contractions.

The index for new orders was 49.2, indicating contraction for the second consecutive month. Eleven industries reported a decline in new orders compared to seven in the previous month.

Export orders increased 3.5 points to 51.0, following six consecutive months of declines. Eight industries, including textile mills, printing and miscellaneous manufacturing reported an increase in activity, while transportation equipment, computer and electronic products, plastics and rubber products and primary metals, reported a decrease in activity.

The inventories index registered 43.5 points in December, indicating that raw materials inventories contracted for the sixth consecutive month.

The price index fell 2.0 points to 33.5, indicating a decrease in raw materials prices for the fourteenth consecutive month.

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Construction Spending Fell in November

Construction spending fell 0.4 percent in November to $1,122.5 billion (SAAR). October’s spending estimate was revised up to $1,127.0 billion. Construction spending during the first 11 months of 2015 amounted to $1,011.9 billion, 10.7 percent higher than in the first 11 months of 2014.

Total private construction spending fell to a seasonally adjusted annual rate of $828.2 billion, 0.2 percent below the revised October estimate of $892.7 billion.

Private residential construction rose to $427.9 billion (SAAR), a 0.3 percent increase from October’s estimate, as new construction of single family units offset slowing growth in construction of multi-family units.

Private nonresidential construction fell 0.7 percent to a seasonally adjusted rate of $400.3 billion, as commercial and manufacturing construction fell.

Public construction spending fell by 1.0 percent to $294.3 billion (SAAR), declining broadly across most nonresidential subsectors. In contrast, construction spending related to public education increased by 5.0 percent.

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