Economy Watch: Homebuilders’ Optimism Edges Down

By Dees Stribling, Contributing Editor

Following a four-point uptick last month, builder confidence in the market for newly built single-family homes fell one point in December to 57 on the National Association of Home Builders/Wells Fargo Housing Market Index, which was released on Monday. Even so, builders remain optimistic, since the threshold with pessimism is 50.

Two of the three index components dropped slightly in December. The index gauging current sales conditions fell one point to 61, while the index measuring expectations for future sales dropped a single point to 65. The index tracking traffic of prospective buyers held steady at 45.

“After a sluggish start to 2014, the [index] has stabilized in the mid-to-high 50s index level trend for the past six months, which is consistent with our assessment that we are in a slow march back to normal,” NAHB chief economist David Crowe says. “As we head into 2015, the housing market should continue to recover at a steady, gradual pace.”

Industrial production up in November

The Federal Reserve reported on Monday that U.S. industrial production increased 1.3 percent in November after edging up slightly in October (0.1 percent, instead of the previous estimate of a 0.1 percent contraction). Also, the central bank now reports that output rose at a faster pace over the period from June through October than previously estimated.

In November, manufacturing output increased 1.1 percent, with widespread gains among various industries. The rise in factory output was well above its average monthly pace of 0.3 percent over the previous five months and enjoyed its largest gain since February.

Also in November, the output of utilities jumped 5.1 percent, as colder-than-usual weather for the month boosted demand for heating. The index for mining decreased 0.1 percent. At 106.7 percent of its 2007 average, total industrial production in November was 5.2 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.8 percentage points in November to 80.1 percent, a rate equal to its long-run (1972–2013) average.

NY manufacturing edges down

Separately, the New York Fed said on Monday, in its Empire State Manufacturing Survey, that that business activity declined for New York manufacturers in December. The headline general business conditions index dropped 14 points to -3.6, its first negative reading in nearly two years. But it might merely be a bump in the road; indexes assessing the six-month outlook were generally lower this month, but nevertheless conveyed considerable optimism about future business activity.

Wall Street continued its downward course, perhaps on worries about the energy sector and a sluggish world economy, or maybe just a correction from recent record highs. In any case, the Dow Jones Industrial Average lost 99.99 points, or 0.58 percent. The S&P 500 was off 0.63 percent and the Nasdaq declined 1.04 percent.