WASHINGTON (MarketWatch) — Manufacturers likely ended 2013 by posting a seventh month of growth, which probably will help fuel a pickup in the broad economy and hiring in the new year, economists say.
This week’s data may also signal continued gains for housing and a rebound in confidence among consumers, the backbone of the U.S. economy. A series of good reports, following recent strong data on business spending and housing, bode well for 2014, economists say.
“As we get ready to close the books on 2013, we’re not only hopeful but reasonably confident (i.e., as confident as one can be in the often humbling world of economic forecasting) that, yes, 2014 will be the year when the U.S. economy finally shifts into a higher gear,” Richard Moody, chief economist at Regions Financial, wrote in a research note.
The data highlight comes Thursday, when the Institute for Supply Management will report on manufacturing in December. Economists polled by Dow Jones Newswires expect the data to show a solid expansion at 56.7%, but slightly pulled back from the 2.5-year high of 57.3% in November . Results above 50% signal growth, and the higher the reading, the faster the growth.
“That would still leave the index at a level normally consistent with strong growth in manufacturing output and employment,” Capital Economics analysts wrote in a research note.
Also Thursday, Markit will release its gauge of U.S. manufacturing. Both reports come two days after a report about Chicago-area business activity. A series of good manufacturing reports could mean that gross domestic product this quarter is stronger than economists are currently forecasting.
Housing on the rebound
The week also brings reports on housing sales, prices and construction.
On Monday, the National Association of Realtors will report on pending sales of homes for November. Economists expect the gauge to rise 1%, after declining 0.6% in October , according to a poll by Dow Jones Newswires. An increase in pending sales — these typically close within two months and can be used to estimate upcoming activity — would follow five months of slumps, when rising mortgage rates cut buying plans. But buyers now are becoming accustomed to higher mortgage rates and pricier properties, economists say.
On Tuesday, S&P/Case-Shiller will report on home prices, and economists expect that annual growth remained speedy, reaching 13.8% in October, up from 13.3% in September , according to Dow Jones Newswires. Low inventory and pent-up demand have been supporting escalating home prices. But eventually rising prices will slow down as more sellers become willing and able to place their homes on the market, increasing inventory.
On Thursday, the government will report on construction spending, and economists polled by MarketWatch expect monthly growth of 0.9% in November, led by new building for single-family homes, compared with 0.8% in October. A stronger housing market would reinforce broad economic growth, as owners and consumers feel more confident about spending. Labor-intensive construction of new homes also adds to growth.
“We expect further employment gains to improve household formation, a key determinant of housing demand,” UBS analysts wrote in a research note. “Combined with the lagged effects of quantitative easing on the willingness of banks to lend, these factors should allow for additional needed investment in housing, helping create the positive feedback loop that is key to a self-sustaining economic recovery.”
Consumers perking up
After weathering a government shutdown and partisan bickering over the federal budget, confidence among consumers is expected to rebound. Analysts track consumer confidence to get a feel for spending and clues about expectations for the labor market, among other topics. On Tuesday, the Conference Board will report its consumer-confidence index, and economists polled by MarketWatch expect the gauge to rise to 75 in December from 70.4 in November . Although holiday retail sales have been somewhat disappointing , overall consumer-spending growth picked up in November, according to the Commerce Department.
By Ruth Mantell, MarketWatch