The biggest daily move for equities was Wednesday when traders read the Fed’s minutes as an indication that monetary easing will be unwound sooner than later.  But the minutes largely reflected debate on technical issues and FedSpeak emphasized that policy is going to be loose for some time.

Recap of US Markets

STOCKS

Except for the Dow, major equity indexes broke a seven week winning streak by being net negative for the week.  Concern about Fed unwinding was the key reason.

After a Presidents’ Day holiday, stocks gained significantly Tuesday on optimism about M&A activity and on better than anticipated German business expectations data.  Advanced reports of a merger between OfficeMax and Office Depot added to the recent build of M&A activity.

However, on Wednesday equities retreated in reaction to FOMC debate over the risks and benefits of further stimulus.  The minutes were seen by many traders as a sign that the Fed would be unwinding sooner than expected.  Economic news was mixed with the housing starts report showing a dip in starts but a gain in permits.  On Thursday, stocks continued down, reflecting worries about the Fed and an increase in initial jobless claims.  Other data were mixed with existing home sales up, Markit flash PMI positive but Philly Fed manufacturing unexpectedly negative.

Stocks rebounded Friday as FedSpeak emphasized that policy is going to be loose for a considerable time.  St. Louis Fed President James Bullard stated this view early in the morning on TV.  This had market impact partly because Bullard is considered a moderate within the Fed and not a dove. But the Fed will still be debating how to unwind.  Other Fed officials also reiterated that policy is going to remain easy for an extended period.

For the week, the Dow ended up in positive territory, fractionally rising above the 14,000 mark.

Equities mostly were down this past week.  However, the Dow was up 0.1 percent.  The S&P 500 was down 0.3 percent; the Nasdaq, down 0.9 percent; the Russell 2000, down 0.8 percent; and the Wilshire 5000, down 0.4 percent. 

For the year-to-date, major indexes are up as follows: the Dow, up 6.8 percent; the S&P 500, up 6.3 percent; the Nasdaq, up 4.7 percent; the Russell 2000, up 7.9 percent; and the Wilshire 5000, up 6.7 percent.

Markets at a Glance

Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.

BONDS

Once again, there was only modest weekly movement in Treasury rates.  Yields eased only slightly.

At the week’s open on Tuesday, rates firmed a little ahead of the Fed minutes on Wednesday.  At mid-week, after initial concern that the Fed minutes indicated early reversal of easing, bond market traders decided otherwise.  Traders were betting that the Fed will continue loose policy and Treasury yields ended the day slightly down.

Rates eased slightly Thursday on a rise in initial jobless claims and on weak CPI inflation at the headline level.  Yields were essentially flat Friday with no notable economic news. 

For this past week Treasury rates were down as follows: the 2-year note, down 2 basis points; the 5-year note, down 4 basis points; the 7-year note, down 4 basis points; the 10-year note, down 3basis points; and the 30-year bond, down 2 basis points.  The 3-month T-bill firmed 3 basis points.

OIL PRICES

The biggest moves for crude oil prices were on the downside on Wednesday and Thursday—each seeing a daily decline of somewhat under $2 per barrel.  Tuesday and Friday posted modest increases.

Wednesday, oil dropped on a fund liquidation in metals spreading to other commodities, including oil.  Also, the Fed minutes led to worries about less robust growth.  The spot price of West Texas Intermediate oil on Thursday fell to the lowest level this year on news showing that U.S. crude stockpiles climbed to the highest level since July.  The weekly petroleum report was delayed due to the Presidents’ Day holiday.

Net for the week, the spot price for West Texas Intermediate fell $2.52 per barrel to settle at $93.44.

The Economy

The big news this week was internal debate within the Fed on quantitative easing.  Data were mixed but somewhat more positive than negative.

FOMC minutes reflect debate on unwinding

This past week, the Fed minutes had the biggest daily impact on equities—on the downside.  But some can argue that the details of the debate on how to unwind loose policy should have been no surprise.

First on the economy, the Fed’s minutes of the January 29-30 FOMC meeting indicated that the Fed saw fourth quarter slowing as largely weather related and was somewhat optimistic about economic growth afterwards.  There was no new news on the Fed’s view of the current status of the economy.  Downside risks, however, were still seen to be European sovereign debt problems and unresolved fiscal cliff issues.

But the debate on quantitative easing is heating up.  Many participants were concerned about the costs and benefits of additional bond purchases.  Several on the FOMC indicated that the Fed should be prepared to vary the pace of bond purchases.  Others stated that it is important not to cut back on accommodation prematurely.  In contrast, some were worried about the potential for a rise in long-term interest rates.  Some wanted to have guidance to be more specific on the path of the fed funds rate if guidance thresholds were passed (on unemployment or inflation).

Many traders worry that the debate indicates that the Fed might unwind its easy policy sooner than earlier believed.  This is a possibility but only a possibility and not the main point of the debate.  The Fed has many technical issues to consider with managing its balance sheet, including impact on financial markets.  And the Fed may actually incur losses on trades when selling assets.  The Fed basically will be employing a reluctant philosophy of buy high and sell low but that is the nature of having engaged in balance sheet expansion and eventual reduction.  Not to worry, the Fed can fund itself. However, the boost in liquidity during and since the recession was seen as necessary to prevent a second depression—something forgotten since the U.S. incurred “only” a severe recession and not a depression.

The Fed clarified that its unemployment “trigger” for beginning to unwind is not necessarily a specific number.

“The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments.”

The Fed clearly is debating the costs and benefits and risks of quantitative easing. There is an implicit recognition that the Fed is in uncharted territory and needs to continually evaluate the appropriateness of quantitative easing and how and when to unwind.

Late in the week, FedSpeak added to the view that monetary policy is going to remain loose for quite some time.  Even a moderate, St. Louis Fed President James Bullard, indicated that Fed policy is likely to very easy for an extended period.   The technicalities of how to unwind—which is being debated—are a somewhat separate issue.

The bottom line is that the Fed is retaining a loose monetary policy.  However, the timing of unwinding is uncertain and the “trigger” for unwinding also is somewhat subjective.  Nonetheless, the minutes are pointing to more detailed guidance ahead that will sooth markets about potential impact of Fed moves.  Traders should look to get plenty of telegraphing ahead of Fed moves and see very gradual moves unless the economy gains momentum faster than currently expected.  Importantly, the Fed has a tradition of internal debate—something markets should get accustomed to in coming quarters.

Housing starts ease in January but permits gain

Housing starts showed some winter volatility in January by declining and showing possible lingering effects from Hurricane Sandy.  However, permits continued to trend upward at a moderate pace.   In January, housing starts declined 8.5 percent, following a sharp rebound of 15.7 percent in December.  The January starts pace of 0.890 million units was up 23.6 percent on a year-ago basis.

December was revised up to 0.973 million units from the original estimate of 0.954 million.

The decrease in starts was led by a monthly 24.1 percent drop in the multifamily component after a 34.7 percent spike in December.

By region, the drop in January starts was led by the Midwest region which fell a monthly 50.0 percent.  Also declining was the Northeast, down 35.3 percent.  Gains were seen in the West and South, up 16.7 percent and 4.1 percent, respectively.

While weather adds to volatility in starts during winter (an outdoor activity), permits (an indoor activity) indicate that homebuilders still have some modest optimism and plan to add to supply.  Housing permits advanced 1.8 percent to an annual pace of 0.925 million units. Notably, single-family permits have not dipped on a month-ago basis since March 2012 and are now at their highest level since June 2008.

Existing home sales slow on limited supply

A shortage of homes on the market is holding down sales of existing homes which did rise but not by much in January, up 0.4 percent to a slightly higher-than-expected annual rate of 4.92 million. December's rate was revised slightly lower to 4.90 million.

Sales are being held back by limited supply of homes on the market—which is a negative now but a positive looking forward. Supply on the market for January was at 4.2 months which was down sharply from 4.5 and 4.8 months in the two prior months and was the lowest rate since the bubble days of 2005. The actual number of homes on the market, at 1.74 million, was the lowest in 14 years.

Low supply generally is good for prices -- but apparently not in January based on this report where both the median price, at $173,600, and the average price, at $221,000, show nearly mid-single digit monthly percentage declines.  But the price data are not based on repeat sales—as is the case for FHFA and Case-Shiller data—and can reflect shifts in composition of sales between the high and low ends. Nevertheless, year-on-year price growth remains very convincing, in the low double digits.

The National Association of Realtors is warning that the story of housing is supply, the result they believe of tight credit which is holding down sales and new building. However, low supply will boost prices and eventually bring more existing homes, and even new homes, into the market.

Markit flash PMI for February

Monthly growth for the nation's manufacturing sector is solid but may be slowing very slightly based on the PMI flash index which posted at 55.2 for February versus 55.8 for the final January reading and compared to January's flash estimate of 56.1. Any reading over 50 indicates monthly growth.

Monthly growth in new orders was strong, at a plus 50 reading of 56.4 which however is down one full point from final January. The index for new export orders, at a sub-50 reading of 48.7, shows monthly contraction and is down nearly three points which underscores weakness in foreign markets.

February output is a big plus in the report, up 1.3 points to a 58.1 level that indicates the strongest monthly rise in nearly two years. This reading points to strength for first-quarter GDP as does the report's inventory data which for a second month show slight builds.

Philly Fed contracts faster in February

Manufacturing in the mid-Atlantic region is going against the national trend for February.  The general conditions index fell to minus 12.5 from minus 5.8 in January.

Forward momentum remains in contraction mode as the new orders index declined from a reading of minus 4.3 in January to minus 7.8 in February. Despite negative readings for general activity and new orders, the shipments index showed improvement.  The index remained positive and edged slightly higher to 2.4.

Labor market conditions are showing signs of stabilizing this month. The employment index increased from minus 5.2 in January to plus 0.9 this month, its first positive reading in eight months.

Overall, the Philly Fed District was softer in February than national data as the latest release of the flash Markit PMI showed moderately positive numbers.

CPI inflation soft at headline but may be temporary

Headline inflation was lower than expected but higher at the core rate. Some special technical factors appear to have held down the overall CPI.  The consumer price index for January was unchanged—the same as in December.  January’s rate posted a little lower than the consensus forecast of 0.2 percent.  The core CPI—excluding food and energy—increased a strong 0.3 percent after edging up 0.1 percent in December.  Analysts projected a 0.2 percent gain.

By major components outside the core, energy declined 1.7 percent in January, following a drop of 0.8 percent the month before.  Gasoline fell 3.0 percent after dropping 1.9 percent in December.

At least some of the decrease in energy was due to special seasonal adjustment by the BLS.  For the seasonal factors introduced in January 2013, BLS adjusted 31 series using Intervention Analysis Seasonal Adjustment, including selected food and beverage items, motor fuels, electricity and vehicles.  This procedure was used for the motor fuel series to offset the effects of events such as damage to oil refineries from Hurricane Katrina.  Essentially, energy costs would have been higher without the “intervention analysis.”  Energy costs are likely going to be up notably in February.

Increases in the indexes for shelter and apparel in January accounted for much of the increase in the index for all items less food and energy, with advances in the indexes for recreation, medical care, and airline fares also contributing.

Year-on-year, overall CPI inflation eased to 1.6 percent in January from 1.8 percent in December (seasonally adjusted). The core rate posted at 1.9 percent in January, matching the December pace.  On an unadjusted year-ago basis, the headline CPI in January on a year-ago basis was up 1.6 percent, compared to 1.9 percent for the core measure.

The January CPI report likely understates inflation due to the special adjustments. And more recent gains in gasoline prices point to stronger headline inflation in February. But high January core inflation may have been just monthly volatility.  The latest CPI report will not change the Fed’s focus on reducing unemployment.

PPI inflation rebounds in January on food prices

The headline PPI rose in January but not for the reason expected.  Apparently, seasonal factors tugged down on adjusted energy costs but food price inflation surged.  The January producer price index rebounded 0.2 percent, following a dip of 0.3 percent the prior month.  The core rate, which excludes both food and energy, gained 0.2 percent, following a rise of 0.1 percent in December.

Food inflation increased 0.7 after dropping 0.8 percent in December.  This advance was led by a 39.0-percent jump in prices for fresh and dry vegetables.  Energy costs in January slipped another 0.4 percent, following a decline of 0.6 percent in December.   Gasoline declined 2.1 percent after decreasing 1.8 percent in December.

Within the core, most of the January advance can be traced to a 2.5 percent rise in the index for pharmaceutical preparations. Higher prices for communication and related equipment also contributed to the increase in the finished core index.  Partially offsetting were declines in prices for passenger cars and light trucks, down 0.8 percent and 0.4 percent, respectively.

For the overall PPI, the year-ago rate in stood at 1.4 percent, compared to 1.3 percent the prior month (seasonally adjusted).  The core rate was up 1.8 percent after 2.0 percent in December.  On a not seasonally adjusted basis for January, the year-ago headline PPI was up 1.4 percent, while the core was up 1.8 percent.

Leading indicators slow but stay positive in January

The index of leading economic indicators points ahead to steady and but slow growth for the nation's economy. The LEI was up 0.2 percent in January, down from a 0.5 percent rise in December but up from no change in November.

Interest rate and credit components are strong pluses for the outlook as is the rally in the stock market. Two very important components are also on the plus side, unemployment claims and building permits with the former pointing to strength in the jobs market and the latter to strength in housing. A negative is consumer expectations which is being depressed by higher payroll taxes, uncertainty over future income, and higher gasoline prices.

The coincident index in January rose a solid 0.4 percent, which points to a respectable rate of current growth and is an early indication of possibly stronger GDP growth for the first quarter.

The bottom line

Markets likely overreacted to Wednesday’s Fed minutes.  The Fed is not going to tighten anytime soon.  But the Fed needs to plan ahead for when it actually does unwind its balance sheet expansion.  Meanwhile, housing still appears to be on a moderate uptrend while manufacturing is mixed nationally versus various regions.  Inflation in January was subdued at the consumer level but upward movement is likely in February due to higher energy costs.

Looking Ahead: Week of February 25 through March 1 

Key sectors for housing, manufacturing, and the consumer get updates. Permits and existing home sales pointed to upward momentum for housing last week and this may be confirmed with upcoming new home sales, pending home sales, FHFA prices, and Case-Shiller.  National manufacturing dipped in January. The durables orders report will indicate whether momentum is up or down.  The consumer is being hit by higher payroll taxes, higher gasoline prices, and delays in income tax refunds. These issues boost the importance of readings on personal income, consumer confidence, and motor vehicle sales.  Finally, expectations are for fourth quarter GDP to be revised up into the positive column and this could have a minor psychological boost on markets.

Monday 

The Chicago Fed National Activity Index showed that economic growth stalled in December as this index posted a plus 0.02 reading for the month versus a revised plus 0.27 in November. Though barely on the positive side, December's reading does indicate that overall economic growth was, however slightly, above historical trend in the month. 

Consensus numbers not available this month

The Dallas Fed general business activity index in its Texas manufacturing survey increased from 2.5 to 5.5 in January. The production index, a key measure of state manufacturing conditions, rose from 3.5 to 12.9, which is consistent with faster growth. Other measures of current manufacturing activity also indicated stronger growth in January. The new orders index jumped 13 points to 12.2, its highest reading since March 2011. The company outlook index also rose sharply to 12.6, largely due to a drop in the share of firms reporting a worsened outlook from 10 percent in December to 6 percent in January.

Dallas Fed general business activity index Consensus Forecast for February 13: 4.0

Range: 3.0 to 5.5

Tuesday

The FHFA purchase only house price index gained 0.6 percent in November, matching the pace in October.  Gains in the month were led by the Mountain region, surging 2.1 percent, with the East North Central lagging, down 1.0 percent.  The year-on-year rate of plus 5.6 percent is at its highest pace since the bubble days of 2006.

FHFA purchase only house price index Consensus Forecast for December 12: +0.7 percent

Range: +0.5 to +1.0 percent

The S&P/Case-Shiller 20-city home price index (SA) gained 0.6 percent in November. Monthly growth rates have been trending in the 1/2 percent range for this report, which is down a bit from last spring but still near the best of the recovery. The year-on-year rate, moving above 5 percent, is now above rates during the stimulus of 2010 and is the highest since the bubble days of 2006.

The S&P/Case-Shiller 20-city HPI (SA, m/m) Consensus Forecast for December 12: +0.8 percent

Range: +0.4 to +1.0 percent

The S&P/Case-Shiller 20-city HPI (NSA, y/y) Consensus Forecast for December 12: +6.8 percent

Range: +6.5 to +7.6 percent

New home sales in December plunged 7.3 percent to an annual rate of 369,000. But this followed a spike the month before. November was revised 22,000 higher for a 9.3 percent monthly surge to 398,000 which is by far the highest rate since the housing stimulus of April 2010. October was even revised upward, by 3,000 to 364,000.  Again, lower supply appeared to be holding sales down. New homes were in short supply though December's adjusted number of homes on the market, at 151,000, was up 2,000 from November and up 4,000 from October.

New home sales Consensus Forecast for January 13: 381 thousand-unit annual rate

Range: 355 thousand to 409 thousand-unit annual rate

The Conference Board's consumer confidence index was down a surprising 8.1 points in January to 58.6. This is the lowest level since the debt limit fiasco of 2011, and though risk of a similar fiasco this year seems to be easing, concern over another impasse may still be weighing, at least slightly, on the consumer.  The consumer's assessment of the jobs market was unfavorable for January, belying what was really strong improvement in weekly jobless claims. Those saying jobs are currently hard to get rose a sizable 1.6 percentage points to 37.7 percent. Moving once again to the outlook, there was a steep decline, down 3.6 percentage points to a very small 14.3 percent, for those who see more jobs opening up six months from now.

Consumer confidence Consensus Forecast for February 13: 61.0

Range: 58.0 to 66.5 

The Richmond Fed manufacturing index in January dropped to minus 12 from plus 5 in December.  New orders also were way down in the Richmond region to minus 17 versus plus 10 in December.  An absence of orders points to future weakness for shipments and employment.

Richmond Fed manufacturing index Consensus Forecast for February 13: -3

Range: -6 to 0

Wednesday

Durable goods orders in December jumped a monthly 4.3 percent, following a boost of 0.6 percent in November. The transportation component spiked 11.7 percent after a 0.7 percent dip in November. Excluding transportation, durables orders increased 1.0 percent, following a rise of 1.2 percent in November.  Numbers reflect revisions from the more recent total factory orders report.

New orders for durable goods Consensus Forecast for January 13: -4.0 percent

Range: -7.0 percent to -1.0 percent

New orders for durable goods, ex-trans., Consensus Forecast for January 13: +0.2 percent

Range: -1.4 percent to +3.0 percent

The pending home sales index fell 4.3 percent in December to pull the year-ago comparison, which had been trending in the double digits, down to plus 6.9 percent.  Regional data showed wide declines especially in the West where the National Association of Realtors stressed that a lack of supply of homes below $100,000 was a special factor constraining sales.

Pending home sales Consensus Forecast for January 13: +3.0 percent

Range: -1.8 to +6.0 percent

Thursday

GDP weakened in the fourth quarter, posting a minus 0.1 percent annualized pace, following a third quarter gain of 3.1 percent.  Much of the slowing in growth was largely due to a sharp slowing in inventory investment and a drop in government purchases.  Demand figures were not quite as weak as overall GDP but still sluggish.  Final sales of domestic product rose 1.1 percent, following an increase of 2.4 percent in the third quarter.  Final sales to domestic producers (which exclude net exports) posted a modest 1.3 percent gain after rising 1.9 percent the quarter before.  Headline inflation for the GDP price index showed a 0.6 percent annualized inflation rate versus 2.7 percent in the third quarter.

Real GDP Consensus Forecast for second estimate Q4 12: +0.5 percent annual rate

Range: -0.1 to +0.8 percent annual rate

GDP price index Consensus Forecast for a second estimate Q4 12: +0.6 percent annual rate

Range: +0.6 to +0.8 percent annual rate

Initial jobless claims for the February 16 week rose 20,000 to 362,000 which was a big jump. But the February 16 week was a four-day week, which increased the impact of seasonal adjustments, and four states, including California, had to be estimated.  The four-week average jumped 8,000 in the week to 360,750 which was slightly higher than a month-ago.  Continuing claims were up 11,000 in data for the February 9 week to 3.148 million but the four-week average was down 7,000 to a 3.186 million level that is about 10,000 lower than the month-ago comparison.

Jobless Claims Consensus Forecast for 2/23/13: 360,000

Range: 345,000 to 387,000

The Chicago PMI in January was very strong, surging 5.6 points to 55.6. December's revised reading at 50.0 indicates no change in conditions that month and was in line with a long run of flat readings going back to September.  New orders highlighted the details, jumping 7.8 points to 58.2 which was the strongest rate of monthly growth since March. Production was up 8.5 points to 60.9, also the strongest since March.

Chicago PMI Consensus Forecast for February 13: 55.0

Range: 53.5 to 57.0

The Kansas City Fed manufacturing index in January posted at minus 2, largely unchanged from readings of minus 1 in December and minus 3 in November.  Manufacturing activity declined at most durable goods-producing plants, while nondurable producers noted a slight increase overall. Most other month-over-month indexes were below zero but higher than in December. The production index inched higher from minus 5 to minus 3, and the shipments, new orders, and order backlog indexes also rose somewhat but stayed in negative territory.

Consensus numbers not available this month

Friday

Sales of total light motor vehicles proved steady and firm in January, at a 15.3 million annual rate versus December's 15.4 million. Though the rate peaked to 15.5 million in October on replacement buying following Hurricane Sandy, January's rate was still well above the low 14 million trend through most of last year. Sales of domestic-made vehicles came in at 12.1 million compare to the prior month's 12.0 million, with foreign-made at 3.2 million versus December's 3.4 million.

Motor vehicle domestic sales Consensus Forecast for February 13: 12.1 million-unit rate

Range: 11.2 to 12.3 million-unit rate

Motor vehicle total sales Consensus Forecast for February 13: 15.2 million-unit rate

Range: 15.0 to 15.8 million-unit rate

Personal income soared a monthly 2.6 percent in December, following a 1.0 percent jump in November.  The huge gain for December was due to special dividends that were paid by many companies late in the quarter in anticipation of changes in individual income tax rates, as well as some acceleration in wages and salaries.   The wages and salaries component rose 0.6 percent, following a 0.9 percent boost in November.  November was strong due to recovering from Hurricane Sandy.  Personal spending was a little soft, coming in with a 0.2 percent rise after a 0.4 percent gain in November.  Turning to inflation, the headline PCE price index was flat in December after slipping 0.2 percent the prior month.   Looking ahead, private aggregate weekly earnings rose 0.4 percent in January, pointing to a moderate rise in private wages & salaries.  However, there likely will be significant offset in personal income from the accelerated payments in December to beat tax increases in January.

Personal income Consensus Forecast for January 13: -2.1 percent

Range: -3.7 to -1.6 percent

Personal consumption expenditures Consensus Forecast for January 13: +0.2 percent

Range: -0.3 to +0.5 percent

PCE price index Consensus Forecast for January 13: +0.1 percent

Range: +0.1 to +0.3 percent

Core PCE price index Consensus Forecast for January 13: +0.2 percent

Range: 0.0 to +0.3 percent

The Markit PMI manufacturing flash index posted at 55.2 for February versus 55.8 for the final January reading and compared to January's flash estimate of 56.1.  Monthly growth in new orders was strong, at a plus 50 reading of 56.4 which however was down one full point from final January.

Consensus numbers not available this month

The Reuter's/University of Michigan's consumer sentiment index rose a solid 2.5 points to 76.3 for the mid-month February reading but was still well below the low 80 readings in October and November which were the recovery's best.  The assessment of current conditions, which offers one of the earliest looks at February, was up a solid three points to 88.0, but the level was still below the low 90s readings of November. The expectations component was also higher, up 2.1 points to 68.7. This was well up from a low of 62.7 in January's mid-month reading but is noticeably below the 79 and 80 readings of November and October.

Consumer sentiment Consensus Forecast for final February 13: 76.0

Range: 75.5 to 76.5

The composite index from the ISM manufacturing survey improved in January to 53.1 for the best rate of monthly growth since May. Growth was very convincing with all five components of the composite over 50.  The new orders index is key and it was up, 3.6 points higher to 53.3. Employment was up more than two points to 54.0 which is a solid growth rate for this index.

ISM manufacturing composite index Consensus Forecast for February 13: 52.8

Range: 52.0 to 54.5

Construction spending in December jumped 0.9 percent, following a rise of 0.1 percent in November.  The increase in December was led by a 2.2 percent gain in residential outlays after a 0.6 percent increase in November.  Most of the latest improvement was from multifamily construction although single-family outlays also advanced.   Public construction declined in the latest month.  On a year-ago basis, overall construction was up 7.8 percent in December versus 9.1 percent in November.

Construction spending Consensus Forecast for January 13: +0.6 percent

Range: -0.7 to +1.0 percent

R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books.

Econoday Senior Writer Mark Pender contributed to this article.