US: Manufacturing and housing robust

5 min

The manufacturing sector continues to thrive. Regional Fed surveys from New York, Richmond, and Philadelphia indicated continued expansion in manufacturing although at a slower pace than last month, while the Chicago survey of general conditions rose to 0.27 from 0.11. Manufacturing industrial production gained +0.1% m/m to +2.4% y/y, just below last month’s three and one-half year high. Fourteen of 19 sub-sectors are growing y/y. Frigid weather drove utilities output up a sharp +5.6% m/m which put the headline industrial production up to +3.6% y/y, the fastest pace in three years. On the housing front, homebuilders remain highly optimistic; even though sentiment slipped from 74 to 72 points, it’s still the highest in almost 13 years. Volatile housing data showed permits were virtually unchanged but starts fell -8.6% m/m in December, perhaps due to weather. Overall the economy continues to demonstrate strength and we expect Friday’s Q4 GDP report to do the same. We maintain our 2018 forecast of +2.6% GDP growth and three to four interest rate hikes.