Manufacturing rebound in January? Construction down to end 2019? Weird reports today

Couple of mixed messages in the economic news today. The first was a surprise turnaround in the manufacturing that was reported for January.

A closely followed survey by the Institute for Supply Management rose to 50.9% last month to 47.8%, topping the key 50% threshold for the first time since July. Readings over 50% indicate more companies are expanding instead of shrinking.

Economists surveyed by MarketWatch had forecast the index to come in at 48.5%....

What happened: A gauge measuring new orders jumped 4.4 points to 52%, also the highest reading since last July. Production turned positive again, though employment is still contracting in part due to a shortage of skilled labor.

Well that’s a change from what we have been seeing recently, especially given that we saw the ISM Manufacturing report out of the Chicago region decline to a multi-year low in the same month. So let’s look into the national ISM report that shows growth, and see where we get it.

Looking at the numbers, it indicates that the big reasons for the jump are increases in orders, production, prices and exports. All of that is notably different from what we’ve been recently seeing in other data, and it makes me want to see if the Commerce Department’s data on new orders and related manufacturing numbers back this up in January.

On the flip side, we got more evidence that 4th Quarter GDP might be revised down later this month, as the Commerce Department said construction spending declined for December, and making for a decline in 2019 for the entire year.

Construction spending during December 2019 was estimated at a seasonally adjusted annual rate of $1,327.7 billion, 0.2 percent (± 0.8 percent)* below the revised November estimate of $1,329.9 billion. The December figure is 5.0 percent (±1.3 percent) above the December 2018 estimate of $1,264.8 billion. The value of construction in 2019 was $1,303.5 billion, 0.3 percent (±1.0 percent)* below the $1,307.2 billion spent in 2018.

Some of the numbers are a bit jumpy for construction, as the numbers are adjusted to account for December having less activity in the sector due to weather, but the decline was pretty widespread, with only residential construction and highway work going up.

US construction, Dec 2019 vs Nov 2019 (annual rate)

Residential construction UP $7.6 billion (+1.4%)
Highway and street constr UP $3.0 billion (+3.1%)

All other private constr DOWN $8.4 billion (-1.8%)
All other public constr DOWN $4.4 billion (-1.9%)
TOTAL CONSTRUCTION DOWN $2.2 BILLION (-0.2%)

Like a lot of things in the economy these days, it is uneven with significant differences across sectors (and likely geographies too, although the construction numbers don't break it out that way). And these two reports add to the general "meh" that the Main Street economy has been showing over the last few weeks.