LIVE MARKETS-Calm before the delayed data storm: Empire State, construction spending

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CALM BEFORE THE DELAYED DATA STORM: EMPIRE STATE, CONSTRUCTION SPENDING

After 43 days languishing in a data desert due to the longest government shutdown in U.S. history, a congressional impasse has ended and investors are girding for a wall of pent-up economic indicators barreling in their direction.

Monday started with a mere trickle as a preview to the flood expected in coming days.

Starting with regional manufacturing, factory activity in New York State surprised to the upside by accelerating faster than anticipated.

The New York Fed's Empire State index USEMPM=ECI jumped 8.0 points, to 18.7 from 10.7, defying the 4.9 point slowdown analysts expected.

A positive Empire State reading indicates monthly expansion; a negative print signifies contraction.

"Manufacturing activity grew at a solid pace in New York State, with the survey’s headline index reaching its highest level since last November," says Richard Deitz, economic research advisor at the New York Fed. "While firms expect conditions to improve, optimism for the future dipped."

Later in the week, the Philadelphia Fed will release its Philly Fed manufacturing report, which should help flesh out the picture of the current month's Atlantic region factory activity.

Next, the Commerce Department's long-in-the-tooth August report on expenditures on construction projects USTCNS=ECI unexpectedly rose by 0.2%, a repeat of July's upwardly-revised increase.

Analysts were looking for a negligible 0.1% dip.

Delving deeper into the Commerce Department's data, spending on residential projects - the tentpole of construction spending in months past - jumped 0.8%. Even so, residential construction spending remains off 2.0% from August 2024.

Outlays by the private sector increased by 0.3%, while spending on government-funded projects was unchanged.

Bernard Yaros, lead U.S. economist at Oxford Economics rightfully calls the three-month-old data "stale," before adding "residential investment is still on track to decline in Q3, but to a much lesser extent than assumed in the November baseline."

"The improvement has less to do with the details of August construction spending, and more so with growing activity in the resale market," Yaros says.

(Stephen Culp)

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