S&P Global reported that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to 52.3 in January, from 50.9 in December. This marks the highest reading in seven months. A value above 50 is indicative of expansion. The S&P Global Manufacturing PMI reported in at 50.3, the highest value in fifteen months, and up from December’s 47.9 reading. Although manufacturing entered positive territory, there was a moderate drop in activity reported. Firms also reported supply disruptions due to weather and transportation delays. The S&P Global U.S. Services PMI increased to 52.9, from 51.4 in December, marking a 7-month high – fueled by client referrals and customers working through their buffer of stocks. Employment figures showed businesses continuing to hire in January, but at a slower pace than the previous month. Employment figures were bolstered by the hiring of skilled workers for long-held vacancies and efforts to clear backlogs of work. The S&P Global report showed a cooling in inflationary pressures as the rate of increase was slower than the series average and the second weakest since October 2020. Overall prices for goods and services increased at their smallest rate since May 2020.

The Commerce Department’s first estimate on the fourth-quarter gross domestic product (GDP) growth reported the economy expanded at an annual rate of (+3.3%). GDP was 3.1% higher than Q4 2022. The first estimate follows a strong (+4.9%) reading for Q3 2023. Much of the increase can be attributed to consumer spending which accounts for over two-thirds of the U.S. economy. Consumer spending, as measured by personal consumption expenditures rose (+2.8%) in Q4 and follows (+3.1%) in Q3. Consumer spending was responsible for 1.91 percentage points (pp) of the total GDP increase. The increase in PCE was driven by spending on services (+2.4%), which added (1.06 pp) to the GDP, while spending on goods increased (+3.8%), adding (0.85 pp). Businesses spent on equipment, factories, and intellectual property, with nonresidential fixed investment increasing (+1.9%), adding (0.26 pp) to the GDP. Exports increased (+6.3%) adding (0.68 pp) to GDP, while imports increased (+1.9%) subtracting (0.25 pp). Residential spending was up (+1.1%) and added (0.04 pp). Government spending was up (+3.3%) in Q4, adding (0.56 pp) to GDP. Federal government spending added (0.16 pp) and state-local spending added (0.40 pp) to GDP. Core prices for personal consumption expenditures, a preferred measure of inflation by the Fed, rose (+2.0%) in Q4; (+3.2%) annually, while the headline number reported in at (+1.7%); (+2.7%) annually.

The U.S. Census Bureau reported new home sales increased 8.0% in December. New home sales rebounded from the previous month which was downwardly revised to reflect a (-9.0%) drop instead of the original (-12.2%) reading. Monthly sales were mixed regionally, led by the Northeast (+32.0%), South (+10.6%), Midwest (+9.2%), and West (-3.4%). December’s seasonally adjusted rate was 664,000 units, showing a (+4.4%) increase year over year. The regional year over year figures were also mixed, led by the West (+7.6%), Midwest (+6.0%), South (+3.7%), and Northeast (-2.9%). The median new house price was (-13.82%) lower than last year at $413,200. The average sale price was (-14.31%) lower than last year at $487,300. Sixty-five percent of new homes sold were in the $150,000 to $499,999 price range. There were 453,000 new homes for sale at the end of December, up from 449,000 units in November. This represents an 8.2 months’ supply at the current sales rate. Year over year, new homes for sale were up slightly at (+0.44%). Houses under construction made up roughly 58% of the December new home sales, with homes not started accounting for about 23%, and completed homes accounting for about roughly 17%.