Economic Data and Growth

In December, the S&P Cotality Case-Shiller U.S. National Home Price NSA Index recorded a 1.3% annual gain, down from the 1.4% gain in November and the weakest full year gain since 2011. The 10-City Composite increased 1.9%, down from 2.0% the previous month, while the 20-City Composite rose 1.4% year-over-year, consistent with November’s gain. Among the 20 cities, Chicago again posted the highest annual gain at 5.3%, followed by New York at 5.1% and Cleveland at 4.0%. Meanwhile, Tampa again posted the lowest annual return, with prices falling 2.9%.

On a month-over-month basis, the U.S. National Index declined 0.3% before seasonal adjustment. At the same time, the 10-City Composite and 20-City Composite both edged down 0.1%. After seasonal adjustment, the U.S. National Index rose 0.4%, while the 10-City and 20-City Composites both grew 0.5%. The Northeast and Midwest continued to outperform other regions as the second half of the year exhibited weaker price growth. Meanwhile, in addition to Tampa, the Sun Belt market kept declining, including Denver (down 2.1%), Phoenix (down 1.5%), Dallas (down 1.5%) and Miami (down 1.5%).

The combination of high financing costs and prices continued to cap growth. Before seasonal adjustment, 15 of the 20 major metro areas saw price declines in December. Over the year, home prices trailed inflation. In comparison, home prices outpaced inflation by 3.7 percentage points over the prior decade, a trend that reversed starting in June 2025.

Consumer confidence increased 2.2 points in February to 91.2. Among its components, the Present Situation Index declined while the Expectations Index rose as consumers’ concerns regarding the present situation worsened, and concerns about the future eased.

The Present Situation Index, reflecting current business and labor market conditions, declined 1.8 points to 120.0. Meanwhile, the Expectations Index, which reflects consumers’ short-term outlook for income, business and labor market conditions, rose 4.8 points to 72.0, remaining below the recession signal threshold of 80 since February 2025.

Views of the current labor market situation improved slightly, with 28.0% of consumers saying jobs were “plentiful,” up from January (25.8%), while 20.6% said jobs were “hard to get,” up from January (19.0%). Looking to the future, 15.7% said they expect more jobs to be available, up from 14.8% the prior month, while 26.1% anticipate fewer jobs, down from 28.7% the previous month.

Mentions of high prices, inflation, trade and politics continued to top the list of topics influencing consumers’ views of the economy. At the same time, mentions of the labor market eased somewhat in February, while comments about immigration increased. Consumers’ 12-month inflation expectations remained elevated but were little changed from January, and the proportion of consumers expecting interest rates to remain high persisted. At the same time, the share of consumers who believe a recession “very likely” over the next year fell, and the small share thinking the economy is already in a recession dipped.

Buying plans for new cars stayed the same in February, while purchasing plans for homes were little changed, although they remained above levels seen a year ago. Consumers’ plans for buying big-ticket items overall improved in February, with used cars, furniture, TVs and smartphones remaining the most popular items among consumers. On the other hand, consumers’ intentions to purchase more services declined overall; however, restaurants, bars and take-out remained the top planned service spending category and edged up in February. Overall, consumers’ views of their current financial situation worsened after surging in January, and views of their future financial situation remained weak.

The Producer Price Index for final demand (also known as wholesale prices) rose 0.5% over the month in January, after prices moved up 0.4% in December. Over the year, producer prices increased 2.9% in January, down from 3.0% in December. Meanwhile, prices for final demand excluding foods, energy and trade services ticked up 0.3% over the month in January after rising the same amount in December. Prices for these goods advanced 3.4% from January 2025.

Within final demand, prices for services jumped 0.8% in January, the largest gain since July, after advancing 0.7% in December. Meanwhile, prices for goods decreased 0.3% in January, after edging down 0.1% in December. Within the final demand services index, margins for professional and commercial equipment wholesaling surged 14.4%, accounting for more than 20% of the January increase. Within the final demand goods index, prices for gasoline fell 5.5%, accounting for nearly 80% of the January decline.

Prices for processed goods for intermediate demand stayed the same in January, consistent with the lack of movement in December. Within the index, prices for nonferrous metals soared 4.8% and 32.9% over the year, while the index for gasoline fell 5.5% and 15.7% year-over-year. Meanwhile, prices for industrial electric power dropped 2.9% from December but increased 3.0% from January 2025. Over the year, the index rose 2.6% after a 3.5% increase in December.

Meanwhile, prices for unprocessed goods for intermediate demand decreased 0.5% in January, after moving up 1.9% in December. The monthly decline was led by a 9.8% drop in raw milk, which plummeted 29.2% over the year. In contrast, prices for nonferrous scrap soared 8.5% in January and 42.3% from January 2025. Over the year, prices for unprocessed goods for intermediate demand decreased 6.1%, the largest 12-month drop since September 2024, after ticking down 0.5% in December.

Manufacturing activity in the Fifth District contracted in February and at a faster pace than the previous month, with the composite manufacturing index decreasing from -6 to -10. At the same time, the local business conditions index declined from -8 in January to -15 in February. Despite current weakness, manufacturers are more optimistic about the future, with the outlook for future local business conditions rising from 19 in January to 22 in February. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments and new orders remained negative and contracted at a faster pace, falling from -5 to -13 and from -6 to -9, respectively. The indexes for employment and vendor lead times ticked down, moving from -6 to -7 and from 0 to -1, respectively. Meanwhile, the share of firms reporting backlogs worsened, edging down from -13 to -14. On the other hand, the average growth rate of prices paid and prices received slowed in February.

Looking ahead, firms expect both price indexes to increase in the next 12 months but at a slower pace than forecasted in January. Expectations for future shipments and new orders remained positive but ticked down from 34 to 29 and from 36 to 35, respectively. Expectations for backlogs grew from 4 to 6. Meanwhile, firms’ expectations about equipment and software spending turned positive, increasing from -3 to -2. In sum, businesses in the Fifth District remained optimistic about future business conditions and investment plans.

In February, Texas factory activity improved after expanding the prior month. The production index increased from 11.2 to 12.5, remaining above the series average of 9.6. The new orders index ticked down 0.7 points to 11.1, while the capacity utilization index stepped up 4.7 points to 11.8. Meanwhile, the shipments index decreased 2.1 points to 9.9. The Eleventh District consists of all of Texas, northern Louisiana and southern New Mexico.

Perceptions of manufacturing business conditions strengthened in February, with the general business activity index rising 1.4 points to 0.2. At the same time, the company outlook index inched up 0.2 points to 3.1. On the other hand, the uncertainty index increased 1.7 points to 6.5 but remained below the series average of 16.8.

Labor market indicators suggested weaker growth in headcounts and a longer workweek in February, with the employment index edging down 0.7 points to 7.5 and the hours worked index rising 5.4 points to 6.1. Nearly 18.0% of firms reported net hiring, while a smaller percentage (10.5%) noted net layoffs.

Price pressures weakened slightly, while wage pressures accelerated in February. The prices paid for raw materials index declined 5.4 points to 31.7. Meanwhile, the prices received for finished goods index ticked down 0.6 points to 17.9 but remained far higher than the series average. The wages and benefits index jumped 14.5 points to 31.9, rising above the series average of 21.0.

The outlook for future manufacturing activity weakened in February, despite the future production index improving 5.1 points to 34.3. Moreover, the future company outlook index moved up 2.5 points to 25.7, while the future general business activity declined 3.9 points to 12.7, remaining above the series average.

New orders for manufactured goods decreased 0.7% in December following a 2.7% increase in November. Meanwhile, new orders for manufactured goods grew 3.7% over the year. When excluding transportation, new orders inched up 0.4% over the month and 0.9% year-over-year in December. Orders for durable goods declined 1.4% following a 5.4% rise in November. Year to date, durable goods orders jumped 7.8%. Nondurable goods orders stayed the same in December after ticking down 0.1% in November. Nondurable goods orders decreased 0.3% over the year.

New orders for nondefense aircraft and parts led the decrease in durable goods orders, falling 24.8% following November’s 98.2% surge. In December, the largest monthly increase occurred in defense search and navigation equipment, which climbed 26.9% after declining 8.7% in November. The largest over-the-year changes occurred in nondefense aircraft and parts (up 106.2%) and photographic equipment (down 5.4%).

Factory shipments rose 0.5% in December after edging down 0.2% in November. Shipments over the year grew 1.7%. Shipments excluding transportation increased 0.4% in December following a 0.1% gain the previous month. Shipments for durable goods moved up 1.0% following a 0.3% decline in November and are up 3.7% year to date. Meanwhile, nondurable goods shipments stayed the same after ticking down 0.1% the prior month, and have declined 0.3% year to date.

Unfilled orders for all manufacturing industries increased 0.9% in December after rising 1.4% in November. Unfilled orders over the year jumped 10.3%. Inventories stepped up 0.9% year-over-year. The inventories-to-shipments ratio edged down from 1.57 to 1.56 in December. Meanwhile, the unfilled orders-to-shipments ratio for durable goods moved down to 7.01 from 7.04 in November.

PHOENIX – Following the announcement of the United States military operations in Iran, National Association of Manufacturers President and CEO Jay Timmons released the following statement:

“Manufacturers in the United States have always stood ready when our nation calls. From serving as the Arsenal of Democracy to equipping those who defend freedom today, our industry has the capacity to support U.S. objectives across multiple theaters and sustained operations. Today, manufacturers honor the courage and commitment of the men and women in uniform who stand watch and carry out this mission.

“Since November 4, 1979, the United States has endured hostility and terrorism from a rogue government in Tehran. Time and again, the Iranian regime has sponsored international terrorism, destabilized its region, violated the rights of its own people and disrupted legitimate commerce and maritime security.

“Through Operation Epic Fury, President Trump has initiated major combat operations with these stated objectives:

• Eliminating imminent threats posed by the regime,
• Preventing Iran from developing nuclear weapons,
• Neutralizing military infrastructure that threatens regional and global security,
• Countering destabilizing regional aggression, and
• Supporting the Iranian people’s right to determine their own future.

“At moments of consequence, national unity matters. Congress should fully engage to ensure clarity of mission, alignment of authority and the sustained support of the American people.

“We also call upon allied governments and partner business associations around the globe to stand together to protect regional stability, safeguard global commerce and reinforce the collective resolve that keeps peace through credible strength.

“When security, commerce and liberty are threatened, the United States must lead with strength, resolve and the support of its people.”

-NAM- 

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.95 trillion to the U.S. economy annually and accounts for 53% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org. 

Building permits increased 4.3% in December but fell 2.2% over the year. Permits for single-family homes in December decreased 1.7% and 10.9% over the year. On the other hand, permits for buildings with five or more units surged 18.1% from November and 18.7% over the year.

In December, housing starts rose 6.2% from November but declined 7.3% over the year. Starts for single-family homes moved up 4.1% from November but dropped 9.0% over the year. Meanwhile, starts for buildings with five or more units jumped 10.1% over the month but fell 1.0% over the year.

Housing completions increased 2.3% over the month but ticked down 0.1% over the year. Single-family home completions edged down 0.1% from November but surged 10.2% from December 2024. At the same time, completions for buildings with five or more units rose 7.1% over the month but plummeted 15.9% from one year ago.

Manufacturing activity in New York state increased but at a slightly slower pace in February, with the headline business conditions index edging down 0.6 points to 7.1. The new orders index similarly ticked down but remained positive, decreasing 0.8 points to 5.8, while the shipments index plummeted 17.3 points to -1.0. Unfilled orders turned positive, surging 17.3 points to 9.1, while inventories rose 9.2 points to 7.1, indicating business inventories are growing again. Delivery times lengthened, and supply availability improved but remained negative, increasing 3.1 points to -1.0.

Employment increased in February, with the index for the number of employees rising 13.0 points to 4.0. At the same time, the average employee workweek index grew to 2.1 from -5.4, signaling an increase in hours worked from January. The prices paid index moved up 6.3 points to 49.1, while the prices received index rose 7.8 points to 22.2, reflecting a faster pace of increase in both prices received and prices paid.

In February, firms’ optimism regarding the future remained high, with the future business activity index advancing 4.4 points to 34.7. In the next six months, new orders are expected to rise and at a slightly faster pace compared to the prior month at 34.9. The future employment index jumped 11.2 points to 26.1, suggesting an anticipated faster pace of employment growth over the next six months. Meanwhile, input and selling price expectations are forecasted to increase at a faster pace, increasing from 52.6 to 57.6 and from 36.5 to 40.3, respectively. Furthermore, capital spending plans strengthened from January, up from 10.3 to 18.2.

In February, Philadelphia’s regional manufacturing activity expanded for the second consecutive month to its highest level since September, with the index for general business activity advancing from 12.6 to 16.3. This month, 31.0% of firms reported increases in activity, while 14.7% of firms noted decreases. The indexes for new orders and shipments fell, moving from 14.4 to 11.7 and from 9.5 to 0.3, respectively. Meanwhile, the employment index turned negative for the first time since June, falling 11.0 points, as the average employee workweek plunged 20.7 points to -11.6.

The prices paid index declined from 46.9 to 38.9, its lowest reading since January 2025, while the prices received index fell from 27.8 to 16.7, its lowest reading since December 2024. As has been the case for many months, the prices received index remained lower than the prices paid index, indicating that manufacturers have been absorbing a portion of higher costs paid.

Looking ahead, indicators showing expectations for future growth grew after two months of declines. After falling 12.6 points in January, expectations for future business activity soared 17.3 points to 42.8 in February. The rise came from an increase in the proportion of firms expecting an increase in activity (52.0%). At the same time, the number of firms anticipating a decrease in activity (9.2%) was virtually unchanged in February. The future new orders index rose from 32.9 to 54.1, its highest reading since November 2024, and the future shipments index moved up from 40.8 to 47.4. On the other hand, the capital expenditures index fell from 30.3 to 14.4, its lowest reading since September. The future prices paid and prices received indexes declined from 66.6 to 54.1 and from 61.8 to 50.1, respectively. Additionally, the index for future employment stepped down from 28.8 to 14.9.

In February, firms were asked about changes in core customer price sensitivity and anticipated cost changes. Of those responses, 30.8% of firms view core customers as more price sensitive since last quarter. Meanwhile, 39.1% of firms expect price changes in their industry’s costs, while 60.9% do not. When asked how they anticipate competitors to respond, 77.8% expect them to raise prices in the near term, while none believe they will lower prices. When asked, 58.3% of firms said they have experienced a net negative impact from tariffs over the past year, but 16.7% have seen a net positive impact. Looking forward, 46.2% expect a net negative impact over the next year from tariffs, while 15.4% predict a net positive impact.