Market News Summary

from NYT:
WASHINGTON (AP) — The latest report showed an increase in personal income and spending rose in December, but a second report indicated that construction spending continue to lag last month.
The first report indicated personal incomes rose more than expected in December and consumer spending increased for the third consecutive month, helping the economy slowly recover.
The second noted that construction spending dropped sharply in December to its lowest level in more than six years as home building fell by the steepest amount in seven months.
The Commerce Department said Monday that incomes rose 0.4 percent, the sixth consecutive increase. That was slightly better than analysts’ expectations of 0.3 percent growth.
Income growth was spurred by a large, one-time Social Security payment. Wages and salaries rose 0.1 percent, or $9.1 billion, after increasing 0.4 percent, or $27 billion, in November.
Consumer spending, meanwhile, increased 0.2 percent, less than analysts’ forecasts of 0.3 percent. The department also revised November’s figure to show a 0.7 percent increase in spending, higher than the initial estimate of 0.5 percent.
Consumer spending is closely watched because it accounts for about 70 percent of total economic activity. In last year’s fourth quarter, consumer spending rose 2 percent, down from a 2.8 percent increase in the July-September period.
That helped lift the nation’s gross domestic product, the broadest measure of the economy’s output, by 5.7 percent in the fourth quarter, the fastest growth in six years. The economy grew at a 2.2 percent rate in the third quarter after a record four straight quarters of decline.
Still, many economists are concerned growth will likely sputter to a 3 percent pace or below in the current quarter once temporary factors such as government stimulus and a slowdown in inventory reductions fades. Many economists expect the economy to grow at about a 2 percent pace this year.
That will not be fast enough to reduce the unemployment rate, which currently stands at 10 percent.
In the second report, the Commerce Department said that spending on new homes, office buildings and highways fell 1.2 percent in December to a seasonally adjusted annual rate of $902.5 billion, the lowest since August 2003. That was much worse than analysts’ expectations of a 0.5 percent drop.
November’s figures were revised down to also show a 1.2 percent decline, below the 0.6 percent drop initially reported.
Construction spending on new homes and apartments fell 2.8 percent, the worst downturn since May 2009. Spending on new office buildings and other commercial projects rose 0.2 percent after falling for seven consecutive months. That was a surprise, given the difficulty many commercial developers have had in obtaining credit.
Housing starts fell 4 percent in December, the government said last month, held back by unusually cold weather. But building permits, an indication of future activity, rose sharply, a sign that activity could rebound in January.
Housing activity was also weak in December because a new homebuyer tax credit was originally slated to expire in November and many buyers rushed to complete purchases before the deadline. Congress has extended the credit through April and expanded it.
The report closes out a difficult year for the construction industry, which has shed hundreds of thousands of jobs. Overall construction spending fell 12.4 percent to $939.1 billion in 2009, the department said, the steepest drop on records dating back to 1964.
Federal construction spending rose by 2 percent to an all-time high of $30.5 billion in December. But cash-strapped state and local governments cut their spending by even more. That caused overall public construction spending to drop by 1.2 percent in December. State and local governments have cut spending on construction for six consecutive months.
In other economic news, a private trade group reported that United States manufacturing sector grew for a sixth consecutive month in January, to its strongest level since August 2004, as factories pumped up production while their customers restocked inventories, a private trade group says.
The Institute for Supply Management said its manufacturing index read 58.4 in January, compared with 54.9 in December. December’s figure was revised lower from 55.9. Analysts polled by Thomson Reuters had expected a level of 55.5. A reading above 50 indicates growth.
New orders, a sign of future growth, jumped to their strongest level since 2004.
Manufacturing has helped lead the U.S. economic recovery as companies replace depleted stockpiles, and a weak dollar boosts exports to fast-growing countries in Asia and Latin America.