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In November, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recorded a 3.8% annual gain, up from 3.6% in October. The 10-City Composite saw an annual increase of 4.9% in November, the same as the previous month, while the 20-City Composite rose 4.3% year-over-year, up from 4.2%. Among the 20 cities, New York again posted the highest annual gain at 7.3%, followed by Chicago at 6.2% and Washington at 5.9%. Tampa again exhibited the lowest annual increase at 0.4%.

On a month-over-month basis, both the U.S. National Index and 20-City Composite dropped 0.1% before seasonal adjustment but increased 0.4% after adjustment. Meanwhile, the 10-City Composite stayed the same pre-adjustment, but rose 0.4% post-adjustment.

The National Index is at an 18th consecutive all-time high, and only the Tampa market fell during the past month. When excluding fast-growing regions, national home prices are trending below historical averages. New York, Washington, D.C., and Chicago are performing well above the norm, and the Northeast is the fastest growing region, with a 6.1% annual gain. Meanwhile, markets in the West and South are trending below average. In fact, Tampa and the entire Southern region rank in the bottom quartile of historical annual gains, dating back to 1988.

Compensation costs for civilian workers increased 0.9% in the three months ending in December. In 2024, compensation costs rose 3.8%, with wages up the same amount, compared to the respective 4.2% and 4.3% increases in 2023. Meanwhile, benefit costs grew 3.6% over the year, compared to a 3.8% rise in 2023. Manufacturing compensation costs increased 0.7% in the three months ending in December and are up 3.6% in the past 12 months, with manufacturing wages up 3.8% and benefits up 3.2%.

Private industry compensation costs increased 3.6% over the year, with wages up 3.7% and benefits up 3.3%. Inflation-adjusted compensation costs rose 0.8% in 2024. Within private industry, union workers saw a 5.1% increase in compensation costs, while nonunion workers had a 3.4% rise. State and local government workers experienced a 4.7% increase in compensation costs, with wages up 4.5% and benefits up 4.9%.

Consumer confidence declined in January to 104.1 from a revised 109.5 in December. The Consumer Confidence Index softened for the second month in a row but remains in the narrow range of readings collected since 2022.

The Present Situation Index, reflecting current business and labor market conditions, plummeted 9.7 points to 134.3, the largest decline of the broader index. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook for income, business and labor market conditions, slipped 2.6 points to 83.9, remaining above the recession signal threshold of 80. Consumers’ assessments of current business conditions declined, with 18.4% of consumers saying business conditions were “good.” Views of the current labor market situation sunk for the first time since September, with only 33.0% of consumers saying jobs were “plentiful” and 16.8% saying jobs were “hard to get.” Consumers expressed pessimism about future labor market conditions. In addition, consumers felt less positive about future business conditions and, to a lesser extent, future income prospects. On the other hand, consumers’ views of their current financial situation improved in January, and six-month expectations for family finances reached a new series high.

As inflation pressures have heated up in recent months, inflation expectations likewise ticked up from 5.1% to 5.3% in January, and expectations for higher interest rates rose, with more than half of consumers (51.4%) expecting increases in the next 12 months. The share expecting rates to fall slipped to 23.9% from 28.5% in December, reflecting the Federal Reserve’s posture that the pace of interest rate cuts will slow in 2025. Buying plans for homes and new cars were flat in January, while purchase plans for other big-ticket appliances were mixed. While confidence in economic conditions weakened this month, concerns about a recession remained near the series low.

Real GDP grew at an annual rate of 2.3% in the fourth quarter of 2024, down from 3.1% in the third quarter and below consensus expectations. Growth during the quarter was driven primarily by increases in consumer spending and government spending, which were offset partially by a decrease in investment. Real GDP increased 2.8% in 2024, down slightly from the 2.9% increase in 2023.

Consumer spending grew at an annual rate of 4.2%, with both spending on goods (up 6.6%) and services (up 3.1%) contributing to the gain. Consumer spending on durable goods, led by recreational goods and vehicles as well as motor vehicles and parts spending, showed significant growth at 12.1%. Meanwhile, consumer spending on nondurable goods rose 3.8%. Within services, spending on health care was the largest contributor to the increase. The rise in federal government spending (up 3.2%) was led by defense spending (up 3.3%).

The deceleration in real GDP primarily came from a downturn in investment (down 5.6%) and a decrease in exports (down 0.8%) in the fourth quarter. Business spending on equipment exhibited the largest drop in the fourth quarter (down 7.8%), while investment in structures also declined (down 1.1%).

Manufacturing activity in the Fifth District remained sluggish in January. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. Although it remained negative, the composite manufacturing index improved from -10 in December to -4 in January.

Among its components, shipments increased from -11 to -9, and new orders rose from -11 to -4. Employment turned positive, improving from -8 to 3, indicating hiring increased in January. The vendor lead time index was relatively unchanged, slipping from 11 to 10 in January, and a smaller share of firms reported declining backlogs, with the index increasing from -13 to -5. Companies grew somewhat more pessimistic about local business conditions, with the index moving from 0 to -5. The average growth rates of prices paid and prices received decreased slightly in January, but firms still expect both to rise in the next 12 months.

Expectations for future shipments and new orders both declined but remained in positive territory, suggesting that firms still anticipate improvement in these areas over the next six months but not as much as previously expected. Expectations for backlogs improved slightly, from 14 to 17. The outlook for future local business conditions fell from 40 to 32. Meanwhile, firms exhibited a more ambitious approach to equipment and software spending, as expectations improved from -7 to 3. Similarly, expectations for spending on capital expenditures grew from 0 to 3. In sum, businesses in the Fifth District remain cautiously optimistic about consumer demand improving in the near future but expect their own expenditures to grow.

In January, Texas factory activity increased, as most industry indicators moved upward. The production index rose from 5.3 to 12.2, improving nearly seven points in January. The new orders index similarly increased from 1.5 to 7.7, the highest reading since April 2022. Meanwhile, the capacity utilization and shipments indexes both rose from near zero readings in December to 5.0 and 8.7, respectively.

Perceptions of manufacturing business conditions improved in January, with the general business activity index surging nearly 10 points to 14.1, the highest reading since October 2021. Meanwhile, the company outlook index continued to grow and reached a multiyear high at 18.7. The outlook uncertainty index, which has been volatile in previous months, remained largely unchanged, at 1.3, indicating uncertainty stayed relatively the same.

Labor market indicators suggested employment and workweeks grew slightly in January. The employment index improved to 2.2, while the hours worked index inched up from -0.5 to 1.9. Almost 14% of firms reported net hiring, while nearly the same percentage (11.7%) noted net layoffs. Moderate upward pressure on prices and wages seen in the past few months continued. The raw materials prices index rose from 12.1 to 17.5, while the finished goods prices index jumped 8.8 points from negative territory to 6.2. Meanwhile, the wages and benefits index ticked up from 17.9 to 20.9.

The outlook for future manufacturing activity became even more optimistic in January, with the future production index increasing from 34.1 to 44.8, with nearly 52% of firms expecting increases in output in the next six months. Similarly, the future general business activity index surged nearly 15 points to 35.5.

On Feb. 1, President Donald Trump imposed 25% tariffs on products from Canada with lower 10% on energy products, 25% tariffs on products from Mexico and an additional 10% on products from the People’s Republic of China.

NAM Vice President of International Policy Andrea Durkin and her team break down the actions for manufacturers:

Executive orders impose tariffs on Canada, China and Mexico: On Feb. 1, President Trump, through three separate executive orders, declared a national emergency and invoked the International Emergency Economic Powers Act to apply ad valorem tariffs on products from Canada, Mexico and China, citing the sustained influx of illicit opioids and other drugs.

• Canada Executive Order:“Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border”
• China Executive Order: “Imposing Duties to Address the Synthetic Opioid Supply Chain in the People’s Republic of China”
• Mexico Executive Order: “Imposing Duties to Address the Situation at the Southern Border”

How tariffs will apply:

• For products from Canada:
• A 25% tariff will be applied in addition to any already applicable duties, fees or charges.
• A 10% tariff will be applied to “energy or energy resources” defined as crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, hydropower and critical minerals.
• For products from China:
  • A 10% tariff will be applied in addition to any already applicable duties, fees or charges.
  • For products from Mexico:
  • A 25% tariff will be applied in addition to any already applicable duties, fees or charges.
• No duty drawback:No drawback shall be available with respect to the duties imposed pursuant to these orders.
• De minimis: Duty-free de minimis treatment will be suspended.

Timing of the tariffs:

• Tariffs will apply from Feb. 4, 2025.
• Tariffs will not apply to goods loaded onto a vessel or in transit before 12:01 a.m. Feb. 1 with certification to U.S. Customs.

Duration of tariffs: The tariffs will remain in place until the president determines that the governments of Canada, Mexico and/or China have taken “sufficient action to alleviate the crisis,” including through cooperative enforcement actions.

A retaliation clause: The president may increase or expand in scope the tariffs imposed under these executive orders if the governments of Canada, Mexico and/or China impose retaliatory tariffs.

Reports to Congress: The Secretary of Homeland Security, in coordination with the Secretary of the Treasury and other agencies, will submit recurring and final reports to Congress on the state of the national emergency under these orders.

What’s next: The NAM issued a statement in response, and the NAM trade team is analyzing the impact on manufacturers and will continue to engage policymakers on these sweeping trade actions.

How USMCA Boosted North American Supply Chains

Existing home sales increased 2.2% in December and jumped 9.3% from December 2023, the largest annual gain since June 2021. Housing inventory declined to 1.15 million units, reflecting a 13.5% decrease from November but up 16.2% from last year. The median existing home price was $404,400, up 6.0% from last year, with all four U.S. regions reporting price increases.

Single-family home sales rose 1.9% in December, with the median price increasing 6.1% from December 2023 to $409,300. Condo and co-op sales grew 5.1% in December and 2.5% from the previous year, with the median price up 4.5% from the prior year to $359,000.

Homes were typically on the market for 35 days in December, up from 32 days in November and 29 days in December 2023. First-time buyers made up 31% of sales in December, up slightly from 30% in November and 29% in the same month last year. All-cash sales accounted for 28% of transactions in December, up from 25% in November but down from 29% in December 2023. Meanwhile, investors or second-home buyers represented 16% of homes purchased in December, up from 13% in November and the same as December 2023. Distressed sales, including foreclosures and short sales, represented 2% of purchases in December, unchanged from the past two months and from the previous year.

The S&P Global Flash U.S. Manufacturing PMI rose slightly from 49.4 in December to 50.1 in January, signaling nominal growth in manufacturing after six months of contraction. Both factory production and new orders increased for the first time in six months. Employment also rose for the third month in a row, and the rate of job creation is the highest since July. Supplier delivery times lengthened, indicating busier supply chains, but this was offset by the greatest drop in inventories in 17 months.

The improvement in sentiment was notable in the manufacturing sector, soaring to the highest reading since May 2022, adding to suggestions that activity may improve further in the coming months. Respondents cited a more business-friendly new administration in terms of looser regulation and lower taxes as beneficial to the outlook. On the other hand, others cited concern over tariffs, a strong dollar and higher prices.

Manufacturing activity contracted modestly in the Tenth District in January, while expectations for future activity remained positive but slipped from 17 to 15 from December. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico. The month-over-month decrease in activity was due to modest declines in both durable and nondurable manufacturing. Most month-over-month indexes were negative, apart from employment, prices and finished goods inventories.

Production fell three points to -9, while new orders improved from -16 to -6. Employment remained roughly the same in January. The backlog of orders remained negative but ticked up to -19 from -22. The year-over-year composite index for factory activity increased from -16 to -9 but stayed negative. Like in December, capital expenditures, prices received and prices for raw materials all increased year-over-year in January while other indexes declined.

This month, survey respondents were asked about their firms’ exports and imports. More than half of firms (55%) sell 1% to 25% of their products or services outside of the U.S., while more than two-thirds (67%) source 1% to 25% of their inputs from outside of the U.S. On the other hand, more than one-third (36%) of firms do not sell their products or services internationally, and only 16% of firms source none of their imports from outside of the U.S. Additionally, a majority of firms do not expect their sourcing decisions to change in the next year (57%) or next three years (53%). Almost a quarter of firms (23%) anticipate slight reductions in internationally sourced inputs in the next three years. Over the next year, 16% of firms forecast increases in sourcing outside of the U.S., while 18% expect increases in the next three years.