Construction Spending, ISM Index

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 highlights the stock market, construction spending and the ISM Index.

• The stock market is greeting the New Year with a nice gain, and in particular the housing sector, based on the Stock Index in the Philadelphia Stock Exchange (symbol HGX).    This index is comprised mostly of publicly-listed homebuilder companies, and is up about 40 percent from 3 months ago as a string of improving home sales and falling inventory figures were released over this time span.
• Today’s data on construction spending (with a long lag time - the latest reading is for November of last year) indicated a fourth straight months of gain in private sector residential construction spending and six straight months of gain in private sector commercial real estate construction spending.
• Separately, the manufacturing sector is showing improvement.  The latest ISM index, which tracks this industry, was 53.9 in December, the highest reading in 6 months.  The employment component showed an even higher reading.  An index above 50 implies an expansion in the sector, so the latest data is pointing to net job gains in the manufacturing sector.
• There have been decisively more economic data pointing positive than negative.  The broadest reading of the economy – GDP – for the fourth quarter could be as high as 3.5 percent.  The GDP data will be released in late January.  Such a growth rate, if it can be sustained throughout this year, could mean 2 to 3 million net new jobs created in 2012.