Personal income and construction spending are on the rise, manufacturing is slowly expanding while consumer spending is down according to different economic reports released Monday.
Personal income rose 0.3% in January, marking the sixth consecutive monthly increase, according to the U.S. Commerce Department, while consumer spending unexpectedly fell by 0.1% for the same month.
The drop in consumer spending is the first decline since September. Spending on durable goods -- or items meant to last three years or more -- fell 5.7% in January, the largest drop since February 1990, erasing much of a 6.8% hike seen in December. Spending on nondurable goods rose 1.3% in January.
Newport Communication Senior Economist Jim Haughey said a federal government pay increase offset a small decline in retail payrolls.
“This is a 3.5%-4.0% annual pace, sufficient for gross domestic product growth of 3.0% or more for this year, but that is only if it is spent.”
He predicts February and March consumer spending will rise slightly due to higher expenses for utilities and gasoline and another short-term uptick in auto sales.
“This will not yield any significant gains in dry van freight. That has to wait until the Iraq situation is resolved and consumer confidence rebounds,” he said.
The Commerce Department also reported on Monday that construction spending in January surged unexpectedly by 1.7%, due to record highs in homebuilding and private construction. While nonresidential construction fell, factory and plant building increased 2.4% and store building climbed 2.5%, the pace is not expected to be sustainable.
“The recent near-record levels of housing starts and building permits can, at best, keep construction spending steady through the spring, because budget cuts are now reducing public construction spending. Construction activity is likely to lag the overall economy until well into next year,” said Haughey.
Meantime, an independent report released on Monday showed the nation’s manufacturing sector continued its expansion in February for a fourth straight month, but the pace was decidedly slower.
The Institute for Supply Management reported their manufacturing activity index fell from 53.9 in January to 50.5 in February,
The figure is just barely above a level that indicates the manufacturing sector is expanding while a below 50 number indicates contraction,
“Overall, it is a mixed report,” said Haughey. “Buyers are significantly more cautious and concerned about the next few months but have not yet cut production much. There is a serious risk that significant production cuts may come in the next few months and remain until the Iraqi situation is resolved.
He said the best news in the report is the rise in the export index and the decline in the import index, noting this was expected due to the recent sharp depreciation of the dollar, especially in Europe.
Personal income rose 0.3% in January, marking the sixth consecutive monthly increase, according to the U.S. Commerce Department, while consumer spending unexpectedly fell by 0.1% for the same month.
The drop in consumer spending is the first decline since September. Spending on durable goods -- or items meant to last three years or more -- fell 5.7% in January, the largest drop since February 1990, erasing much of a 6.8% hike seen in December. Spending on nondurable goods rose 1.3% in January.
Newport Communication Senior Economist Jim Haughey said a federal government pay increase offset a small decline in retail payrolls.
“This is a 3.5%-4.0% annual pace, sufficient for gross domestic product growth of 3.0% or more for this year, but that is only if it is spent.”
He predicts February and March consumer spending will rise slightly due to higher expenses for utilities and gasoline and another short-term uptick in auto sales.
“This will not yield any significant gains in dry van freight. That has to wait until the Iraq situation is resolved and consumer confidence rebounds,” he said.
The Commerce Department also reported on Monday that construction spending in January surged unexpectedly by 1.7%, due to record highs in homebuilding and private construction. While nonresidential construction fell, factory and plant building increased 2.4% and store building climbed 2.5%, the pace is not expected to be sustainable.
“The recent near-record levels of housing starts and building permits can, at best, keep construction spending steady through the spring, because budget cuts are now reducing public construction spending. Construction activity is likely to lag the overall economy until well into next year,” said Haughey.
Meantime, an independent report released on Monday showed the nation’s manufacturing sector continued its expansion in February for a fourth straight month, but the pace was decidedly slower.
The Institute for Supply Management reported their manufacturing activity index fell from 53.9 in January to 50.5 in February,
The figure is just barely above a level that indicates the manufacturing sector is expanding while a below 50 number indicates contraction,
“Overall, it is a mixed report,” said Haughey. “Buyers are significantly more cautious and concerned about the next few months but have not yet cut production much. There is a serious risk that significant production cuts may come in the next few months and remain until the Iraqi situation is resolved.
He said the best news in the report is the rise in the export index and the decline in the import index, noting this was expected due to the recent sharp depreciation of the dollar, especially in Europe.
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