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The service industry continues to improve according to the ISM’s non-manufacturing index. The index improved to a reading of 56.1 in December, its highest level since February. December’s improvement marks the fifth increase in six months. The non-manufacturing index has now remained above 50 – indicating industry expansion – for 36 consecutive months.



The details of December’s report were encouraging as well, with new orders improving to 59.3. The employment index jumped 6.0 points, reaching 56.3, its highest level since march. Export orders improved in December, gaining 1.5 points and presenting a much smaller drag on expansion.

Overall business activity edged lower in December, losing 0.9 points, however remain above 60, an extremely strong reading. Inventories improved slightly in December, however remain below their neutral threshold of 50, indicating a drag on expansion.

Read the ISM release.

Construction spending continued to improve, rising 1.5% in December, its fastest level since August. Spending has now improved for 5 months and is 4.3% above its level one year ago.


Both private and public construction contributed to December’s growth. Private construction recovered in December, growing 2.1% after falling 0.4% in November. The improvement in private construction was led by non-residential construction, which grew 3.3% in December. Residential construction grew as well, but by a more modest 0.8%.

Public construction grew 0.5% in December, down from the 1.7% growth the previous month. The largest contributor to public spending was highway and street construction, which rose 1.8% from the previous month.

Read the report.

In December the consumer price index remained unchanged for the second consecutive month. Headline CPI has failed to register positive growth for three consecutive months causing the year ago change from December 2010 to now be 3.0%. Core prices rose by 0.1% in December, moderating from November’s 0.2% increase. The year ago change for core prices held at 2.2%, an acceptable level for policymakers.


December’s slight increase in core prices was more than offset by falling energy prices, which fell 1.3% in December. Energy prices have now risen 6.6% year-over-year, significantly less than the 19.6% year-over-year gain reported in September. Food prices rose by 0.2% in December, slightly higher than the pace of 0.1% seen in the two previous months.

Price appreciation in core goods was driven by services, which saw prices rise 0.3%, an increase from the 0.2% reported last month. This was partially offset by a 0.2% fall in the price of goods, the first decline in three months.

Read the report.

New home sales finished 2011 on a negative note, with December’s pace of sales falling 2.2% from November to an annualized pace of 307,000 units. This pace is 7.3% below the pace seen in December 2010. The supply of new homes remains well balanced as prices continue to decline.


The decline was led by the South, where the pace of new home sales fell 10.1%. This decline may have been, in part, a correction from November’s 14.8% growth in November. The only other region to slow was the Midwest, falling 3.7%. The Northeast saw sales jump by 46.7%, however, this increase had little effect on national levels, as the Northeast represents only 7% of national sales. Sales in the West increased 9%.

The supply inched up in December to 6.1 months, but remains below the 6-month average of 6.4 months supply. Prices continued to fall in December, with the median home price falling 7% from November to $201,100. This price level is 17% below the median price seen one year ago.

Read the report.

Consumer credit rose by $14.6 billion in the final month of 2012, driven entirely by gains in non-revolving credit. Consumer credit has now grown for five consecutive months, gaining over 10 billion each month. Gains in recent months have been driven almost entirely by the non-revolving segment. Growth from a year ago slipped slightly, falling to 5.7% in December from 5.8% the previous month.



Nonrevolving balances accounted for the entirety of December’s gain, more than offsetting a decline in revolving balances. Revolving credit fell by $3.6 billion in December, negating most of the gains seen in the previous two months. Revolving balances have been volatile in 2012, rising in just half of the months.



Nonrevolving credit grew by $18.2 billion in December, its fifth consecutive gain and the largest gain of the five. Nonrevolving credit has now grown 8.8% in the past year. On a non-seasonally adjusted basis, nonrevolving credit saw much smaller gains. Student loans continue to make heavy contributions to credit growth, accounting for about half of the non-seasonally adjusted balance.



Read the Federal Reserve release.