Last Week in the News (February 9, 2009)

On Monday, February 2, the Institute for Supply Management said its manufacturing index rose in January to 35.6, up from a record low of 32.9 in December. Any reading below 50 signals contraction. Economists had expected a reading of 32.6.

The National Association of Realtors (NAR) reported that its pending home sales index, a forward-looking indicator based on contracts signed, rose 6.3% to 87.7 in December 2008. NAR chief economist Lawrence Yun said the index shows a modest rebound. “The monthly gain in pending home sales, spurred by buyers responding to lower home prices and mortgage interest rates, more than offset an index decline in the previous month,” he said.

The Commerce Department reported total construction spending fell 1.4% in December, more than the 1.2% decline economists had expected. It was the third consecutive monthly decline. In 2008, construction spending fell by a record 5.1% compared to a decrease of 2.6% in 2007.

Consumer spending fell 1% in December after a 0.8% decline in November. This marks a record sixth consecutive monthly decline in consumer spending. For the year, consumer spending rose by 3.6%, the smallest annual increase since 1961. On a positive note, the savings rate rose to 3.6% in December. That was the highest level since tax rebate checks pushed the rate up to 4.8% in May 2008.

On Thursday, the Labor Department said new applications for unemployment benefits rose last week to a seasonally adjusted 626,000 from a revised figure of 591,000 the previous week. Economists had anticipated a reading of 583,000.

On Friday, the Labor Department reported that the nation’s unemployment rate increased to 7.6% in January from 7.2% in December. Businesses cut 598,000 jobs in January, the biggest monthly decline since December 1974.

In other economic news, the Commerce Department said factory orders declined by 3.9% in December, a record fifth straight drop.

Upcoming on the economic calendar are reports on retail sales on February 12 and consumer sentiment on February 13.