Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update, highlighting the manufacturing sector, is after the jump.
- Today’s report from ISM on the manufacturing sector was strong in February. The index climbed from 60.8 last month to 61.4, its highest level since May of 2004. Production of goods is up as are new orders, while inventories have fallen suggesting that further production is needed to replenish stocks. This cycle is good for employment and incomes, builds demand for housing and mitigates the pressures that push homeowners into delinquency.
- ISM’s release reported upward price pressure on a broad group of commodities. The recent surge in gas prices could heat up builder costs and dig into consumer spending.
- Construction appears to be strengthening according to the Census’ release on New Construction Spending this morning. While the headline figure fell 0.7% in January, new residential construction rose 5.3% relative to December, but was 7.7% below January of 2010.
- Fannie Mae released its National Housing Survey for the 4th quarter of 2010 yesterday. Though down from the boom period, a majority of respondents continue to view housing as a good investment. According to the survey, 5 out of 6 respondents expect rental prices to rise with an average of 2.1% in 2011, while house prices will rise a modest 0.4%. Surprisingly, renters expect home prices to rise 0.8%, while owners anticipate a 0.2% gain.
- The manufacturing sector touches nearly every city and is important for job creation. As it expands, jobs, incomes and optimism will improve. Production has ramped up and low inventories suggest that this trend will continue. Spending on residential construction is also good for job growth. Much of this spending is concentrated in multi-family units to satisfy the growing rental market, but pockets of growth in residential construction do exist and have been on the increase in markets where foreclosures were low and demand was relatively resilient. The economy continues to improve, though at a measured pace, but more jobs are needed.