ECONOMIC NUGGETS – November 4, 2013

1. The failure of Congress to pass a budget resulted in the partial shutdown of the federal government that lasted from October 1 through October 16. Most reputable sources estimate that the shutdown reduced fourth quarter real (inflation adjusted) gross domestic product (GDP) growth about 0.5% at a seasonally adjusted annualized rate (SAAR). Some, but not all, of this loss will be recaptured in the first quarter
2. The shutdown ended when Congress passed a continuing resolution (CR) funding government operations. The CR simply extended last year’s budget through January 15, leaving in place the sequester (the across the board reduction in spending for much of the government). The legislation also lifted the debt ceiling allowing the government to continue to borrow until early February by most estimates, at which time the debt ceiling would prevent borrowing and spending for the government―except to the extent that new revenues flow into government coffers
3. The partial shutdown of the federal government did not save money: it cost money. Federal employees received back pay for the time they were furloughed. During the shutdown, some taxes and fees were not collected and will not be collected retroactively
4. The shutdown proved disruptive to several government construction projects—stopping or delaying them. There was even some spillover to private construction and the private economy as uncertainty about the future economic climate (yet to be fully resolved) resulted in many businesses delaying hiring and investment. Many government contracts were delayed or put on hold, forcing the contracted private firms to furlough or lay off employees
5. Congress and the administration have until January 15 to pass a budget for this fiscal year or to pass another CR—a poor solution, but better than a shutdown. It is not clear what the outcome will be. Failure to pass a budget or CR would mean another partial shutdown, although most pundits believe that is unlikely
6. Failure to raise the debt ceiling would be an even bigger threat to the economy and the nation. The impact of hitting the debt ceiling would be widespread, meaning more government operations would be affected. The result would be the delay of numerous payments, including payments for Social Security and Medicare, federal payrolls, contractors, tax refunds, and debt payments (a technical default of U.S. government debt)
7. No economic data were collected or released by the government during the shutdown. Since the government reopened, some delayed data (such as August construction spending data) have been released. Most government data originally scheduled for release in late October or in November will be released at a later date. In general, by early December, most delayed government data will be available, and new data will become available on their normal release schedule
8. Slow economic growth, partly due to the shutdown and uncertainty over government fiscal policy, has prompted the Federal Reserve to continue its $85 billion per month asset purchase program (i.e., no tapering for now). At present, the Fed is unlikely to start reducing its purchases before spring and possibly not until summer
9. August total commercial construction spending was $915.1 billion (SAAR), +0.6% from July and +5.9% year-to-date not seasonally adjusted (NSA) compared to the same period in 2012. July spending was revised up by $8.6 billion, +1.0% of its previously reported level
• Nonresidential building construction spending was $296.8 billion, essentially unchanged from July (+0.03%) and -2.0% year-to-date from 2012. July spending was revised up $3.4 billion, +1.2% of its previously reported level. June, however, was revised down $3.6 billion, -1.2% of its previously reported level
• Lodging construction spending turned in a healthy gain for the second month in a row, up 2.6% in August, after shooting up 7.1% in July. On a year-to-date basis, spending was up 23.1% over last year
• Office construction spending was up for the fourth month in a row, +1.5% for August and +2.0% for July, but year-to-date spending was down 2.0%
• Manufacturing construction spending, after surging 11.0% in July, was essentially flat (-0.01%) in August and was up 2.8% year-to-date
• Heavy engineering (non-building) construction spending was $271.8 billion, +0.5% and -0.1% year-to-date from 2012. June and July spending were revised up by $2.7 billion and $3.7 billion—+1.0% and +1.4% of their previously reported numbers, respectively
• New residential construction spending was $209.7 billion, +1.9%―its 23rd consecutive monthly increase―and +33.2% year-to-date from 2012
10. The September AIA Architecture Billings Index (ABI) was up 0.5 points to 54.3 from 53.8 in August. September was the 13th month in the last 14 months that the ABI was above 50. A reading above 50 indicates increased billings, a positive for future commercial construction
11. The NAHB/Wells Fargo Housing Market Index (HMI) fell 2 points in October to 55. This rollback from what appeared to be an overly optimistic outlook among homebuilders, left the HMI above 50 for the fifth consecutive month, a positive for single-family residential construction
12. Housing prices are still moving higher. Both 10-city and 20-city S&P/Case-Shiller® Home Price seasonally adjusted (SA) indexes have increased for 19 consecutive months. In August, they were both up 0.9%. On a year-over-year NSA basis, they were both up 12.8%
13. For all 20 cities, home prices on a year-over-year NSA basis have increased for eight consecutive months. On a monthly SA basis, prices were up in all 20 cities
14. The SA Federal Housing Finance Agency’s (FHFA) Purchase-Only Home Price Index increased 0.3% in August, its 19th monthly increase in a row. On a year-over-year NSA basis, the index was 8.5% higher
15. The SA Producer Price Index (PPI) for finished goods fell 0.1% in September after rising 0.3% in August. On a year-over-year NSA basis, the September PPI was up 0.3%
16. A price index for inputs used in nonresidential construction, excluding capital equipment, was unchanged in September after increasing 0.5% (NSA) in August. The index was up 0.1% (NSA) from September 2012, while the PPI for inputs for residential construction was up 1.2%
17. The Consumer Price Index (CPI) rose 0.2% (SA) in September after rising 0.1% in August. The CPI was up 1.2% (NSA) from September 2012. Core CPI, which excludes food and energy prices, rose 0.1% (SA) in September for the second month in a row. On a year-over-year basis, the index was up 1.7% (NSA) from September 2012
18. via:http://www.reedconstructiondata.com/market-intelligence/bernie-markstein/economic-nuggets-8211-november-4-2013/