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Housing Activity Poised to Improve

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The NAHB housing market index fell to 72 in January after reaching an 18-year high in December. The index measures builders’ sentiment for the single family housing market. Builders remain optimistic about the economy but continue to battle rising costs for labor and materials. Despite the obstacles builders faced in 2017, including a series of hurricanes, the annual totals for permits, housing starts and completions were at the highest levels in a decade. The 8.2 percent decline in construction activity in December represents a normalization of activity after a couple of months of unusually high activity post-hurricanes. The pace of permits issued remained at 1.3 million, suggesting construction activity will remain strong as we begin 2018.

Other Key Indicators this Week:

Manufacturing – The December Empire State Manufacturing Index was revised higher to 19.6. The January index fell slightly to 17.7, as severe weather in the northeast region hampered activity. Expectations for future business activity remain strong, especially for planned capital expenditures. The manufacturing component of industrial production rose 0.1 percent in December. While lower than the November reading, it was the fourth consecutive increase. Total industrial production increased 0.9 percent in December, due to large increases in mining and utility output. Capacity utilization increased to 77.9, the highest reading in three years and just below the 44-year average.

Fed Beige Book – The latest district review from the Federal Reserve noted modest to moderate economic expansion the last 45 days of 2017.  Most regions reported tight labor markets, with wages increasing in a range of industries. Retailers reported upbeat holiday sales. Firms in some districts noted the ability to successfully raise selling prices. The Dallas Fed, in particular, reported its regional economy accelerated to a "robust" pace.

Consumer Sentiment – The University of Michigan survey of consumer sentiment unexpectedly fell this month to the lowest level since July. The decline was led by consumers’ concerns over their current financial situation, despite reports that income levels are actually improving. Expectations for future conditions increased, with 70 percent of respondents believing the impact of the tax reform will be positive. The overall level of optimism remains near the highest levels since the recession.

Between the Numbers:

Markets are currently pegging the odds of a government shutdown at midnight tonight at 30 percent. If there is a shutdown, the average duration of the 11 that have occurred since 1977 is less than four days, and the cost to the economy is $1 billion-$1.5 billion/day, with the losses rising the longer the closure. If it lasts a week, first quarter GDP would be cut by 0.15 percent.  Elliot F. Eisenberg, Ph.D.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.