ISM, Construction Spending & PCE

Construction Spending +0.2% vs prior +1.0%; housing starts where up last week 14.5% but spending is pulling back, sounds like someone is in a rush to break ground, but can't get the sticks up.

Meanwhile, ISM Index 56.6 vs prior 54.8; Inside the number: 33 straight months of growth in the factory sector, but the first increase after 3 months of decline.

The employment index +3.7% to 55.0% from 51.3% showing an increase in hiring. New orders +3.9% to 61.9% in February from 58.0% showing an increase in new orders.

Inventories +3.1% to 49.6% from 46.5% showing a slowing in liquidation. Customer Inventories +2.5% to 48.5% from 46% showing a rise in customer inventory.

Backlogs of orders+1% to 54.5% from 53.5% showing a growth in backlogs. The price index -2.5% to 62.5% from 65.0% showing a drop in prices paid.

The economic slack is thin and the potential for additional inflation abounds.

Full ISM Report

January Personal Income +0.7% vs prior +0.5%; Personal Spending +0.9% vs prior +0.7%; Inside the number: Core PCE +0.2%, but Personal Consumption Expenditures +0.9% vs Dec +0.7% vs Nov +0.5% vs Oct +0.2%

Can you say inflation is SCREAMING? I can and so can the Commerce Department which said inflation eroded most of the income gains for U.S. residents in January, with real disposable incomes up 0.1%.

Personal saving negative -0.7% vs prior -0.4%. Percentage price changes YOY: durable goods +6.3%, non durable goods +5%, services +2.4%.

And the really scary part, Total PCE Q405 $83.9B vs Q305 $167B, durable goods went from $15.4B to negative -$48.7B, non durable goods dropped from $71.2B to $38.2B while services increased from $80.5B to $94.3B. Can you say squeezed consumer, I can.

A continued pullback in spending would grind the economy to a halt and increase economic slack. This could occur latently while the Fed continues to raise due to energy pass through and Gulf reconstruction efforts.

Full PCE Report

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