News

Building permits fell 0.7% in December and 3.1% over the year. Permits for single-family homes rose 1.6% in December but declined 2.5% over the year. Permits for buildings with five or more units fell 5.8% from November and 5.4% over the year.

In December, housing starts jumped 15.8% from November but slipped 4.4% from December 2023. Additionally, starts for single-family homes rose 3.3% from November but fell 2.6% from December 2023. Meanwhile, starts for buildings with five or more units soared 58.9% from November but declined 11.3% over the year.

Housing completions decreased 4.8% over the month and 0.8% over the year. Single-family home completions fell 7.4% from November and dropped by the same percentage over the year. Completions for buildings with five or more units decreased 1.7% over the month but grew 9.4% from December 2023.

U.S. import prices advanced 0.1% in December, the same as the previous two months, with both higher fuel and nonfuel prices contributing to the increase. Over the past year, import prices rose 2.2%, the largest year-over-year increase since December 2022. U.S. export prices advanced 0.3% in December, after staying the same in November. Both higher agricultural and nonagricultural prices contributed to the increase. Over the past year, export prices rose 1.8%, the largest year-over-year increase since January 2023.

Fuel import prices increased 1.4% in December, after rising 0.9% in November. These increases are attributed to higher prices for natural gas and petroleum in December. Meanwhile, prices for import fuel rose 0.3% over the past year, the first over-the-year increase since July 2024. Import prices for petroleum advanced 0.3% in December, while import prices for natural gas surged 40.6% over the month.

Nonfuel import prices ticked up 0.1% for the second consecutive month in December. Nonfuel import prices have not declined on a monthly basis since May 2024, when they fell just 0.2%. Higher prices for foods, feeds and beverages and consumer goods more than offset lower prices for nonfuel industrial supplies and materials, capital goods and automotive vehicles in December. The price index for nonfuel imports increased 2.4% over the past year.

After inching up 0.1% in November, agricultural export prices advanced 0.5% in December. Over the past 12 months, agricultural export prices dropped 1.2%. Meanwhile, nonagricultural export prices increased 0.3% in December, with higher prices for nonagricultural industrial supplies and materials and automotive vehicles more than offsetting lower prices for capital goods. Over the past year, nonagricultural export prices rose 2.2%, the largest annual increase since December 2022.

The NFIB Small Business Optimism Index rose 3.4 points in December to 105.1, the second consecutive month above the 51-year average of 98 and the highest rating since October 2018. Of the 10 components included in the index, seven increased, two decreased and one stayed the same. After declining last month, the Uncertainty Index declined another 12 points to 86, as business leaders gain certainty following the election.

Despite increased optimism, inflation is still the top concern for many small business owners, with 20% identifying higher input and labor costs as their primary issue, unchanged from November and surpassing the issue of labor quality by one point. In December, 35% of small business owners reported jobs they could not fill, down 1% from November.

A net 28% of small business owners planned price hikes in December, unchanged from November. A net 29% of small business owners reported raising compensation, down 3% from November. A net 1% of owners reported paying a higher rate on their most recent loan, down 4% from the previous month and the lowest reading since September 2021. Profitability remained under pressure, with a net negative 26% reporting positive profit trends, the same as November. Of those reporting lower profits, 35% claimed weaker sales.

The outlook for general business conditions continued the positive trend, improving 16 points to 52. Small business owners share the sentiment of consumers, who continue to seek lower prices and not just a slowing of price increases. A continuation of the 2017 tax cuts and deregulation will be the key policy areas of concern for the small business community in 2025.

In January, Philadelphia’s regional manufacturing activity increased overall. The index for current general business activity jumped from a revised -10.9 to 44.3, the highest reading since April 2021. Around 51% of firms reported increased activity this month, while just 6.6% saw decreases and 40.7% experienced no change. The indexes for new orders and shipments leaped to 42.9 and 41.0, respectively. Additionally, firms continued to report an increase in employment after steady job gains last month, with the employment index edging up from 4.8 to 11.9. The average employee workweek index surged from -3.7 to 20.5.

Price indexes both rose to recent highs. The prices paid index increased five points to 31.9, the highest reading since December 2022, and the prices received index jumped 24 points to 29.7. In recent months, the prices received index remained much lower than the prices paid index, indicating manufacturers were eating a sizable portion of those higher costs paid.

Looking ahead, most future indicators increased, but concerns about future costs remain. The index for future general business activity rose from a revised 33.8 in December to 46.3 in January. A higher proportion of firms (53.6%) still expected increases in activity. Additionally, the future new orders and shipments indexes rose, with the future shipments index rising to its highest point since July 2021. The index for future employment ticked up eight points to 40.4. After decreasing last month, the capital expenditures index increased 17 points to 39.0. The future prices paid index rose nine points to 67.3, while future prices received slipped one point to 53.6.

Manufacturing activity in New York state declined in January, with the headline general business activity index retreating 14.7 points to -12.6. In January, the new orders index decreased to -8.6, falling 12.9 points, while the shipments index fell 10.8 points to -1.7, reflecting modest declines in both orders and shipments. Unfilled orders improved slightly to -4.7 from -8.4, while inventories dropped from 10.5 to 5.8. Delivery times lengthened, rising 10.9 points to 3.5, while supply availability was unchanged, moving down to 0.0.

Employment increased slightly in January, with the index for the number of employees rising from -6.6 to 1.2, suggesting relatively steady employment levels. The average employee workweek fell from -2.3 to -15.1, signaling a significant decline in hours worked. Both input and selling price increases picked up, as reflected in the prices paid index rising 8.0 points to 29.1 and the prices received index increasing 5.1 points to 9.3.

Manufacturers feel more optimistic about the months ahead. The index for future business activity increased 9.8 points to 36.7, with more than 53% of respondents expecting conditions to improve over the next six months. Employment is forecasted to improve, but slightly less than previously anticipated, slipping 0.3 points from last month, while the average employee workweek is expected to increase, jumping 10.3 points. Meanwhile, inventories are forecasted to drop, and new orders are anticipated to increase, rising 5.9 points to 34.2 in January.

The Producer Price Index for final demand (also known as wholesale prices) increased 0.2% in December, after rising 0.4% in November. In 2024, the final demand index rose 3.3% on an unadjusted basis, which is the largest increase since the year-over-year gain in February 2023 of 4.7%. Prices for final demand excluding foods, energy and trade services inched up 0.1%, the same as November. Prices for these goods increased 3.3% in 2024 after moving up 2.7% in 2023.

In December, prices for final demand services stayed the same, after four consecutive increases, while prices for final demand goods rose 0.6%. The increase in the index can be attributed to prices for final demand energy, which rose 3.5%, and was led by a 9.7% increase in the index for gasoline. The index for final demand goods, excluding foods and energy, was unchanged.

Processed goods for intermediate demand increased 0.3% in December. This change was led by a 1.6% rise in the index for processed energy goods. On the other hand, prices for diesel fuel dropped 1.3%. Prices for processed goods for intermediate demand advanced 0.2% over 2024 after declining 2.8% in 2023.

Meanwhile, prices for unprocessed goods for intermediate demand moved up 3.2% in December, the largest increase since August 2022. The rise was driven by a 10.0% boost in energy materials, led by a 57.7% jump in the natural gas price index. Alternatively, prices for carbon steel scrap dropped 11.7%. Prices for unprocessed goods for intermediate demand rose 5.1% in 2024 after falling 18.7% in 2023.

Consumer prices increased 0.4% over the month and 2.9% over the year in December, accelerating from the 2.7% over-the-year rise in November. Core CPI, which excludes more volatile energy and food prices, edged down to a 3.2% over-the-year increase and rose 0.2% over the month, which is down from the 0.3% monthly gains from the four prior months.

Shelter rose 0.3% over the month and 4.6% over the year in December, the smallest 12-month increase since January 2022. On the other hand, food price increases are inching back up, rising 0.3% over the month and 2.5% over the year in December. Prices for transportation services climbed 0.5% over the month and 7.3% over the year, with motor vehicle insurance surging 11.3% over the year.

Energy costs soared 2.6% in December, accounting for more than 40% of the monthly increase of the all-items index, but fell 0.5% over the year. Price changes within the energy category varied widely. For example, energy commodity prices are down 3.9% over the year, while utility (piped) gas service prices are up 4.9%.

As the over-the-year headline rate has ticked up in previous months, markets are anticipating that the Federal Open Market Committee will keep rates steady at its meeting next week. As was exhibited in its December Summary of Economic Projections, the FOMC’s expected easing plan of 100 basis points of rate cuts in 2025 was dialed back to 50 bps as the Fed’s progress on inflation slows.

Industrial production increased 0.9% in December after rising 0.2% in November. Meanwhile, manufacturing output moved up 0.6%, with a 6.3% gain in the aerospace and miscellaneous transportation equipment index leading the increase. Despite the over-the-month gain, aerospace and miscellaneous transportation equipment output declined 5.6% over the year. At 103.2% of its 2017 average, total industrial production in December rose 0.5% from the same month last year. Capacity utilization stepped up to 77.6%, but remains 2.1 percentage points below its long-term average from 1972 to 2023.

In December, major market groups saw mixed results, but a majority posted gains. Among consumer goods, the production of durables decreased 0.4%, led by home electronics (-0.9) and automotive products (-0.4%), while the index for nondurables rose 0.7%, with the greatest increases in energy (1.9%) and clothing (0.9%). The business equipment index improved 1.4% in December, with transit equipment up 10.3% after rising 6.1% in November.

Durable goods manufacturing increased 0.4% in December, and most durable manufacturing industry groups posted gains. Meanwhile, nondurable goods manufacturing rose 0.7% in December, with the largest gain in petroleum and coal products (1.6%). Manufacturing capacity utilization increased 0.4% to 76.6%, which is 1.7 percentage points below the long-term average.

Preserving the pro-manufacturing policies of the Tax Cuts and Jobs Act will “ensure that manufacturing remains the driving force of the American economy,” small manufacturer Courtney Silver told Congress this week.
 
What’s going on: Silver—president and owner of third-generation, family-owned precision machining business Ketchie and immediate past chair of the NAM’s Small and Medium Manufacturers Group—testified Tuesday at a House Ways and Means Committee hearing on the necessity of preserving soon-to-expire tax reforms and reinstating provisions that have expired already.

• “Critical pro-growth provisions from tax reform have expired already, and more harmful changes are on the way at the end of this year,” she said. “This means that every member of this committee has the opportunity to take real action that supports manufacturing in America.”   

A critical moment: The stakes now are extremely high for manufacturing and the U.S. economy as a whole, she added, citing findings from an NAM study out this week showing that in the absence of congressional action to preserve pro-manufacturing tax policies:

• Nearly 6 million U.S. jobs (and more than 1 million manufacturing jobs) are at risk;
• American workers will lose more than $540 billion in wages; and
• U.S. GDP would fall by more than $1 trillion.

A recipe for success: The passage of tax reform led to a period of record business for Ketchie, which allowed the company to expand and reward its team members.

• “Over 2018 and 2019, we were able to invest more than $1 million into capital equipment and create new jobs within Ketchie,” Silver said. “We upgraded our security and our HVAC systems and invested in new technology on our shop floor. And most importantly, we provided raises and bonuses to all of our employees.”
• “Business boomed throughout our supply chain, and demand for our parts soared. Our typically organized shop floor was covered in pallets of materials to keep up with our customers’ orders.”

… and for stagnation: But that growth was stopped in its tracks in 2022, when measures from the TCJA began to expire. And more expirations are on the way.

• “The loss of the pass-through deduction, increased individual taxes and changes to the estate tax will hurt my ability to grow and create jobs,” Silver said.   

Ripple effect: What’s more, manufacturers rely on each other—so when one takes a hit, all their supply chain partners take it, too, Silver said.

• She told the committee that the software vendor Ketchie uses was “dramatically affected” by the 2022 expiration of first-year research-and-development expensing. “They have less ability to create new jobs, to innovate the product that I use every day to run my business,” Silver told the committee. “There’s a ripple effect.”    

Complex work requires certainty: The manufacturing sector isn’t “me buying equipment, pressing a button and a widget comes out,” Silver continued. It is a complicated industry on which millions rely every day—and one whose players need consistent tax policies.

• “To take raw material and to transform it into a useful object that we all benefit from is extremely tough,” Silver went on.

The bottom line: “We need pro-growth tax policies that are permanent, that are consistent, that are predictable to help us be able to grow because our manufacturing supply chain in our country needs us,” Silver said.

A busy week: Silver also spoke at the NAM’s Tuesday Capitol Hill press conference announcing the release of the tax study.

Allowing crucial pro-manufacturing tax provisions to expire will be devastating for the U.S. economy, according to a landmark EY study released today by the NAM.
 
What’s going on: “Pro-growth tax policies from President Trump’s 2017 tax reforms were rocket fuel for manufacturers and made the U.S. economy more competitive on a global scale,” NAM President and CEO Jay Timmons said.

But in 2022, key provisions began to expire—and additional tax reform measures are scheduled to sunset at the end of this year. If Congress doesn’t preserve these pro-growth policies, the U.S. economy will face dire consequences:

• Nearly 6 million jobs will be put at risk.
• Approximately $540 billion in employee compensation will be lost.
• U.S. GDP will be reduced by $1.1 trillion.

Manufacturing impact: The manufacturing industry will bear the brunt of this economic damage, according to the study.

• More than 1.1 million manufacturing jobs and $126 billion in manufacturing worker wages are on the line if Congress does not preserve critical pro-manufacturing policies from the Tax Cuts and Jobs Act.  

The onus is on Congress: “It is the responsibility of Congress to act quickly so we can protect Americans’ livelihoods, prevent wage decreases and avoid the largest tax hike in history,” said House Speaker Mike Johnson (R-LA).
 
Critical players: The U.S. economy relies heavily on manufacturers, which in turn rely on competitive tax policy—and that makes these provisions’ renewal crucial, said Johnson & Johnson Executive Vice President and Chief Technical Operations & Risk Officer and NAM Board Chair Kathy Wengel.

• “[M]anufacturers—both large and small—drive innovation, create opportunity and strengthen communities across the country. … Maintaining competitive tax policy is essential to sustaining this momentum.”   

What we’re doing: The NAM continues its advocacy blitz following the study’s release.

• This morning, Courtney Silver, president and owner of North Carolina–based precision machining company Ketchie and immediate past chair of the NAM’s Small and Medium Manufacturers Group, is testifying at a House Ways and Means Committee hearing on the need to make pro-manufacturing TCJA reforms permanent.
• At 4:30 p.m. EST today, the NAM will hold a press conference on Capitol Hill announcing the study’s launch. Speakers will include Timmons, Speaker Johnson, House Majority Leader Steve Scalise (R-LA), House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Mike Crapo (R-ID). Watch live here.