On Friday, the Bureau of Labor Statistics will release its first estimate of GDP for the fourth quarter of 2011. The consensus of most economists – including myself – is that the year ended with real GDP up 3 percent in the final quarter. If true, this suggests that the economy has begun to rebound from weaknesses earlier in the year, and other data tend to bear out this finding.
Last week, the Federal Reserve Board found that industrial production rose 0.9 percent for manufacturers in December – its fastest pace in one year. Both durable and nondurable goods production rose for the month, reflecting gains that were more broad-based. Much of the growth prior to that point stemmed primarily from durables, as reflected by the 7.1 percent increase in activity in 2011 versus the 0.8 percent gain among nondurables. Overall, these numbers provide some momentum moving into 2012, with many manufacturers optimistic about future activity.
This more positive outlook is reflected in the three most recent regional surveys. Manufacturing activity in California, New York and Pennsylvania improved, with strong gains in durable goods production in California and increased momentum in the Empire State. In the Philadelphia Fed survey, the news was more mixed. While perceptions about the current business environment improved, new orders and shipments eased somewhat. Nonetheless, the Philly results suggest modest growth from last month, and all of these surveys are upbeat regarding future production, employment and capital spending in the coming months.
Other economic reports also provide welcome news. While housing starts were lower in December than in November, strength in the single-family new construction numbers is encouraging, and the longer-term trend has been a gradual shift upward in the still-depressed housing market. Indeed, statistics from the National Association of Home Builders and the National Association of Realtors help to confirm this trend. Meanwhile, prices at both the consumer and wholesale levels have eased in recent months, led largely by lower energy costs. Core inflation remains modest, with prices up around 2 percent since last year.
The Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday, with the Federal Reserve deciding whether to stimulate economic growth with a new round of quantitative easing or to continue its current policies of maintaining extremely low interest rates for the foreseeable future. With a new makeup of the FOMC, this first meeting of 2012 could be instructive. Reduced inflationary pressures and continued anxieties about Europe might provide a greater impetus for inflationary “doves” on the FOMC, but improvements in the domestic economy might improve the hand of those advocating for no change in strategy. In addition, the Fed plans to roll out a new communications strategy with this announcement by providing more information on its interest rate and other targets.
Beyond GDP and monetary policy, other releases this week include measures of regional manufacturing activity from Richmond and Kansas City. New durable goods figures will also come out on Wednesday. It should shape up to be a fascinating week for gauging the overall strength of the current economy.
Chad Moutray
Chief Economist
National Association of Manufacturers
2012 GENERAL SESSION STARTS WITH A BANG
Not wasting any time, the Utah Legislature wrapped up the formalities and held standing committee hearings in both Houses this afternoon. The mood was one of let’s get to this and get the work done and not waste any time.
Of interest to UMA were several bills worth watching:
SB-39 – Gubernatorial Authority for Higher Education – (Senator Reid) would place authority for higher education governance with the Governor. It passed out of Senate Education Committee this afternoon to the floor of the Senate for consideration. Despite what is being claimed, the Governor is not supporting this measure, according to a conversation I had with the Lt. Governor this morning. UMA is monitoring this and a couple companion bills to SB-39.
HB-28 – Economic Development Task Force – (Rep. Wilson) – Establishes a legislative and private sector task force to study ways to improve economic development in Utah and how to remove impediments to private sector economic development and job creation. UMA is named in this bill as part of task force. The House Workforce Services Standing Committee nearly unanimously approved the measure for debate on the floor of House. UMA is not opposed to the creation of this task force, we wonder if it is redundant considering all the other efforts by the Governor, GOED, EDCUtah and a host of others.
HB-35 – Extension of Recycling Market Development Zone Tax Credits (Rep. Harper) – Extends for 10 years an income tax credit used by entities using recycled metals as an incentive to recycle and create new products from recycled metals. It provides a 5% income tax credit on equipment used to recycle metals. NUCOR Steel is a major user of this tax credit. HB-35 passed the standing committee and was reported to the House calendar on a 9-6 vote.
HOUSING FORECAST REPORT PREDICTS RISING HOME SALES
Utah Business
The Salt Lake Board of REALTORS released its annual 2012 Salt Lake Housing Forecast report, which predicts rising home sales and further price declines. The report, written by James Wood, director of the Bureau of Economic and Business Research, points to clear signs of an economic recovery and housing affordability. In fact, seven in 10 homes sold in Salt Lake County in 2011 were affordable to Utah’s median household income of $57,000.
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U.S. ECONOMISTS SEE SMALL 2012 GROWTH PICKUP
Today in Manufacturing
About two-thirds of the economists who participated a recent survey expect the nation's gross domestic product to grow at a rate above 2 percent this year ... continue
NAM'S TIMMONS: MANUFACTURING COST DISADVANTAGE IS NO. 1 ELECTION ISSUE
Quick Manufacturing News
Candidates must lay out plans cut unnecessary regulations and taxes. Click to continue
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