An Encouraging Start For 2012 Economic Releases

The first major economic release of the December economic profile suggests that momentum continues to bubble. The ISM’s factory index rose 1.2 percentage points to 53.9 last month, the highest since April and an acceleration from the pace of November’s gain. If the first reading on the windup to 2011 is any indication, the statistical case is a bit stronger today for expecting the economy to muddle forward, perhaps at a slightly faster clip, in the months ahead.

Reviewing the ISM index with the annual change in the stock market (S&P 500) implies that equity prices will trend higher. As the chart below shows, the ISM benchmark has been turning higher recently as the S&P has remained flat on a year-over-year basis.

The bullish ISM report found support in today’s other data release: construction spending for November, which rose an annualized 1.2% and is now at the highest level since June 2010. This report adds another data point to the argument that that the housing sector is finally reviving.
Today’s numbers also suggest that the upbeat reading of consumer confidence for December isn’t a fluke. “After two months of considerable gains, the Consumer Confidence Index is now back to levels seen last spring,” says Lynn Franco, Director of The Conference Board Consumer Research Center, in a press release from last week.
The question, of course, is whether the rest of the week’s scheduled economic releases will confirm (or deny) today’s buoyant numbers? Thursday brings word of the December update on the ISM Services Index and the weekly jobless claims report. The big news comes on Friday, when the December payrolls report hits the street. For the moment, economists are moderately optimistic that more good news is on tap on all three counts, according to The consensus forecast for private non-farm payrolls, for instance, is anticipating a net gain of 170,000 for December vs. November’s 140,000. Nothing less than growth in employment is required to quell worries linked to weak income growth. A gain of 170k in private jobs may not suffice, but it’s probably the bare minimum required to keep hope alive.
Meantime, it’s been a good year so far for economic news.