Manufacturing Shrinks, Spending Stalls: U.S. Economic Takeaways

What you need to know about Monday’s U.S. economic data:


  • 48.2 after December’s 48, fourth month of contraction (below 50)
  • Factory employment index fell to 45.9, weakest since June 2009
  • Gauge of new orders rose to 51.5 from 48.8
  • Measure of output ticked up to 50.2 from 49.9
  • 10 of 18 industries contracted, while 8 expanded

The Takeaway: Manufacturing activity last month remained close to the lowest since June 2009, buffeted by persistent weakness in the oil industry, the stronger dollar and cooling overseas markets. The woes were reflected in a pullback in the measure of employment, and a four-month low for export orders. At the same time, there’s a hint the industry may be starting to stabilize. New orders returned to expansion territory, which, if sustained, bodes well for production in coming months. The orders gauge “really drives the system,” Bradley Holcomb, chairman of the ISM factory survey, said on a conference call with reporters.


  • Spending unchanged after prior month revised up to 0.5 percent gain
  • Incomes climbed 0.3 percent for a second month
  • Saving rate rose to 5.5 percent, matching highest since December 2012

The Takeaway: Monday’s report showed that most household consumption last quarter was done in November, with purchases flat in the months immediately before and after as Americans remain reluctant to put their gas savings to work. Waning demand for automobiles and lower utility usage amid warm weather may also have held back outlays, economists said. Meanwhile real disposable personal income climbed 3.5 percent in 2015, the most in nine years. That figure has been helped by muted inflation, which continues to trail the Federal Reserve’s goal. The central bank’s preferred gauge of inflation climbed 0.6 percent in the year ended December, well below the 2 percent target. Consumers will need to ramp up their spending to enable growth to get off to a better start in the new year. January’s prospects for a rebound may be limited, however, after an East Coast snowstorm blanketed much of the region in heavy snow.


  • Rose 0.1 percent (forecast 0.6%) after 0.6 percent drop (previous down 0.4 percent)
  • Private nonresidential outlays fell 2.1 percent, most since January 2013
  • Private residential spending rose 0.9 percent
  • Taxpayer-funded construction outlays climbed 1.9 percent

The Takeaway: The data were weaker than the government’s assumptions for 4Q GDP, according to economists at JPMorgan and Barclays, who revised down their tracking estimates for the period to 0.5 percent from 0.7 percent. Not only was December weaker than forecast, but November and October construction outlays were revised down.

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