FOMC to Start Publishing Predictions

Construction totals were up 1.2 percent month-over-month in November, with residential construction leading the way.

The Federal Reserve Open Market Committee (FOMC) released the minutes from its Dec. 13 meeting on Tuesday, after the central bank’s typical delay of a few weeks. Much of the minutes involved commonplace observations–the U.S. economy’s growing slowly, unemployment is still too high, and housing is still depressed.

Regarding CRE, the FOMC said that “financing conditions for commercial real estate appeared to remain strained … Issuance of commercial mortgage-backed securities (CMBS) was light amid deteriorating liquidity conditions in the CMBS market. Prices of most types of commercial properties continued to be depressed, while both vacancy rates and delinquency rates for commercial properties stayed close to their recent highs.”

The committee also made a few unremarkable predictions: “[We] continue to expect a moderate pace of economic growth over coming quarters and consequently anticipate that the unemployment rate will decline only gradually,” the minutes said. “Strains in global financial markets (central banker code for the euro zone) continue to pose significant downside risks to the economic outlook.”

However, Ben Bernanke and his band of monetary policymakers managed to slip in something novel. Going forward, the Fed plans to start publishing predictions of board members regarding interest rates. Starting on Jan. 25, the central bank will release the range of predictions made by its members (but not individual predictions) on short-term interest rates in 2012, 2013 and 2014–the better, the thinking goes, to manage the expectations of the market on the subject, though for a few years anyway anything but “more low rates” would be a daring prediction indeed.

Construction inches up in November

The Census Bureau reported on Tuesday that the value of construction projects in the United States edged up in November 2011 by 1.2 percent when compared with October. Year-over-year construction totals were also up, though not quite as much, gaining only 0.5 percent since November 2010.

Leading the way was residential construction. Not single-family houses, since that market remains largely comatose, but rather an increasing and well-documented interest among developers—and the lenders that fuel their dreams—to build apartment buildings. Month-over-month in November, residential construction gained 1.8 percent. For the year, it was up 2 percent.

Construction of some kinds of properties has fallen through the floor. The value of religious-building construction, for instance, is off 23.1 percent since last year, while the category that the Census Bureau calls “conservation and development”—mostly public projects with a conservation goal—was down 23.3 percent since November 2010. Still, total private construction was up 4 percent year-over-year, while total public construction was down 5.3 percent.

Stocks, commodities rise

Wall Street decided to begin the year on a positive note, perhaps because things are seemingly quiet for now, except for the war of words in the Strait of Hormuz that’s pushing oil prices up. In any case, the Dow Jones Industrial Average gained 179.82 points, or 1.47 percent, while the S&P 500 was up 1.55 points and the Nasdaq advanced 1.67 percent.

But stocks weren’t the only things increasing in price. The aforementioned crude oil kicked off the year with a 4 percent price increase on Wednesday, to $102.96 a barrel—the highest since May, after a mini-panic about Libya had driven prices up. Gold and silver, which had been sliding lately, were in an advancing mood as the world worried about war in the Middle East. Even the likes of corn, soybeans and cotton rose in price.