December industrial production: modest pickup, steady trend, no sign of overheating

 

December industrial production: modest pickup, steady trend, no sign of overheating

Overview
The Federal Reserve’s G.17 release for December 2025 (published January 16, 2026) shows a modest improvement in industrial activity. Total industrial production increased 0.4% month over month, while manufacturing rose 0.2%. Mining fell 0.7% and utilities jumped 2.6%, so part of the headline strength reflects utilities (often weather-sensitive) rather than broad-based factory acceleration. (Federal Reserve)

The three-horizon snapshot
Below is the same story told across three timeframes (monthly, 3-month moving average, and year over year), using the numbers in your table (rounded to one decimal):

Industrial production (output)

• Total industrial production: 0.4% m/m, 0.2% (3-month MA), 2.0% y/y

• Manufacturing (NAICS): 0.2% m/m, 0.0% (3-month MA), 2.1% y/y

• Manufacturing (SIC): 0.2% m/m, 0.0% (3-month MA), 2.0% y/y

Capacity utilization (how “tight” the system is)

• Total utilization: 0.2% m/m, 0.1% (3-month MA), 0.5% y/y

• Manufacturing utilization (NAICS): 0.1% m/m, -0.1% (3-month MA), 0.9% y/y

How to interpret it

1. The month looked better than the underlying trend
   A 0.4% monthly gain in total IP is a healthy print, but the 3-month trend in manufacturing is basically flat (0.0% when rounded). That combination often means “a decent month” rather than “a sustained re-acceleration.” The Fed’s release reinforces that split: manufacturing rose in December, but it still declined at a 0.7% annual rate in the fourth quarter. (Federal Reserve)

2. Output growth is stronger than utilization growth
   Year over year, output is up about 2.0%, while utilization is up less than 1.0% in your table. That pattern typically points to improved production without the kind of capacity strain that tends to create bottlenecks. In the official release, capacity utilization for total industry increased to 76.3%, and the operating rate for manufacturing was 75.6%. Both remain below long-run averages, which usually implies slack rather than overheating. (Reuters)

3. The composition matters: utilities did a lot of the lifting
   Utilities rose 2.6% in December while mining fell 0.7%. When utilities are the swing factor, it is wise to avoid over-extrapolating one month’s headline gain into a new trend for factories. (Federal Reserve)

What it may imply for growth and inflation

• Growth signal: positive, but moderate. Output is rising and the year-over-year pace is constructive, yet the 3-month manufacturing trend suggests a steady-to-sideways factory backdrop rather than a breakout. (Federal Reserve)

• Inflation signal: not obviously inflationary from capacity pressure. With utilization still below historical norms, the industrial side is not flashing a classic “too hot” warning. (Inflation can still come from services, housing, wages, or commodities, but the capacity channel looks calm.) (Reuters)

What to watch next

1. Does manufacturing’s 3-month trend turn clearly positive?
   A couple of additional months with manufacturing gains would matter more than one good print.

2. Does utilization rise for the right reasons?
   A healthy cycle typically shows utilization rising because output is consistently improving, not because supply is constrained.

3. Composition: utilities normalization and mining direction
   If utilities cool off next month, does total IP stay firm anyway? That will tell you whether the rebound is broadening.

Source note
Release: Federal Reserve, Industrial Production and Capacity Utilization (G.17), December 2025 data, released January 16, 2026. (Federal Reserve)

Existing Home Sales: Activity Rebounds as Supply Tightens, Prices Stay Flat

The latest existing-home data shows a familiar 2026 pattern: transactions are improving, supply is tightening in the short run, and prices remain essentially flat. In other words, the market is moving again, but it is not delivering strong price momentum.

Sales are clearly rebounding. Existing home sales rose 5.1% month over month, with the 3-month moving average up 2.4% and sales up 1.4% year over year. Single-family sales tell the same story: up 5.0% month over month, up 2.4% on a 3-month basis, and up 1.8% year over year. That combination matters. A one-month jump can be noise, but when the 3-month average and year-over-year numbers are also positive, it suggests demand is becoming more consistent rather than just producing a one-off spike.

Supply, however, tightened sharply in the latest month. Housing inventory for existing homes fell 18.1% month over month (and 7.8% on a 3-month basis), while months’ supply fell 21.4% month over month (and 9.2% on a 3-month basis). Single-family supply metrics show the same direction: inventory down 14.4% month over month and months’ supply down 17.5% month over month. This is the kind of short-term move that can quickly shift the buyer experience on the ground: fewer listings, more competition for well-priced homes, and a faster decision cycle.

But the year-over-year picture is less tight than the month-to-month shock suggests. Inventory is still higher than a year ago: up 3.5% for all existing homes and up 8.1% for single-family homes. Months’ supply is also higher year over year: up 3.1% (all homes) and up 6.5% (single-family). That year-over-year cushion helps explain why prices are not accelerating even as sales improve.

Prices are soft in the short run and nearly flat over the year. The median sales price for existing homes fell 1.1% month over month and is down 0.6% on a 3-month basis, yet is up only 0.4% year over year. Single-family prices look similar: down 1.4% month over month, down 0.7% over three months, and up just 0.2% year over year. This is not a market screaming “breakout.” It is closer to a market stabilizing—where affordability constraints and still-elevated financing costs keep price growth contained.

How to interpret the current setup

1. The market is thawing, but not overheating. Sales are rising, which often happens when buyers adjust to a “new normal” in rates or when pent-up demand starts to reappear. However, muted year-over-year price gains suggest demand is not strong enough to generate broad-based pricing power.

2. Short-term supply moves can change negotiating dynamics quickly. The steep month-over-month declines in inventory and months’ supply can create local pockets of competitiveness—especially for homes that are well-located, well-maintained, and priced close to recent comparable sales. Even in a flat price environment, “the good ones” can still receive multiple offers.

3. The year-over-year supply increase is the anchor. Higher inventory versus last year is a structural offset that reduces the odds of runaway price growth. Unless the year-over-year supply trend flips meaningfully lower, it will be hard for prices to accelerate for the overall market.

What this means for buyers and sellers

For buyers, the data argues for speed without overpaying. Short-term supply is tighter, so preparation matters (pre-approval, clear decision criteria, quick scheduling). But the nearly flat year-over-year price trend supports negotiation when a listing is stale, overpriced, or needs work.

For sellers, the message is: you can get activity, but you must earn the price. With price growth near zero over the year, “test-the-market” pricing is riskier. The best approach is to price near comps early, maximize presentation, and be open to financing-related incentives if needed.

Bottom line

Existing home sales are improving (+5.1% month over month), supply tightened sharply in the latest month (inventory -18.1%, months’ supply -21.4%), but prices remain essentially flat year over year (+0.4%). This looks like a market in motion, not a market in boom mode—where transaction volume can recover while pricing stays restrained.

Why Korea Moves With Some Markets—But Not Others

Investors often talk about “global markets” as if all countries move together. But when you look closely at the correlation patterns between Korea and other major equity markets, a much more nuanced picture emerges.

A new correlation analysis reveals that Korea has very high daily-return correlations with some countries—such as the United States, Japan, Singapore, Hong Kong, and Europe—while showing much lower correlations with resource-heavy economies like Brazil and South Africa.

Below is a simple infographic summarizing the findings:

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1. Korea moves closely with markets tied to global growth

Countries with high correlation to Korea include:

• United States

• Japan

• Hong Kong

• Singapore

• EAFE (developed markets)

• China

• Canada

• Australia

• Germany

• United Kingdom

These markets share several common features:

A. Exposure to global demand

Korea is one of the most export-dependent economies in the world.
Its stock market reacts strongly to:

• shifts in global demand

• interest rate cycles

• US dollar movements

• global liquidity

• trade volumes

That means Korea tends to move in sync with other countries that are similarly sensitive to global macro drivers.

B. The technology and semiconductor cycle

Korea’s market is dominated by tech and semiconductors—Samsung Electronics and SK Hynix alone can determine market direction.
Naturally, Korea aligns with other tech-heavy or tech-linked markets:

• United States (mega-cap tech, AI, semiconductors)

• Japan (chip equipment makers)

• Taiwan (TSMC-driven ecosystem)

• Singapore (trade/tech hub)

When the global semiconductor cycle booms, these markets rally together.
When the cycle weakens, they fall together.

C. China-related supply chain linkages

Korea’s deep ties to China—both as a market and as part of supply chains—mean it moves with Hong Kong, Singapore, and Japan more than investors may assume.

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2. Why Korea diverges from Brazil, South Africa, and some emerging markets

The markets with the lowest correlation to Korea include:

• Brazil

• South Africa

• (relatively) Taiwan

And the reason is simple: their economic engines are completely different.

A. Commodity-driven vs. tech-driven

Brazil and South Africa move with prices of:

• oil

• metals

• minerals

• agricultural products

Korea’s market is shaped primarily by:

• semiconductors

• electronics

• autos

• global manufacturing

These forces rarely move together—so the stock markets don’t either.

B. Local political and currency volatility

Brazil and South Africa experience frequent moves driven by:

• political uncertainty

• fiscal outlook swings

• currency shocks

• inflation spikes

• central bank surprises

Korea, by contrast, is more tethered to global tech and trade—not domestic political cycles.

C. Taiwan’s special case

Taiwan may seem similar to Korea (both are semiconductor superpowers), but:

• Taiwan’s index is extremely concentrated in TSMC

• geopolitical risks with China introduce idiosyncratic movements

• timing differences in chip cycles can create divergence

Thus Korea–Taiwan correlation is only moderate.

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3. The big takeaway:

Korea is a global-cycle market, not a local-cycle market.

Its stock market responds more to:

• global economic conditions

• the semiconductor/AI cycle

• USD and interest rates

• global risk appetite

than to domestic politics or local commodity dynamics.

What this means for investors

• Korea is high beta to global growth and tech sentiment.

• Diversification across countries is not enough—diversification across economic drivers matters more.

• Commodity-heavy EM markets still offer diversification from Korea.

• But during global shocks, correlations tend to rise across the board.

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The Housing Pipeline Is Cooling: What the Latest Starts, Permits, and Completions Are Really Saying

 

The Housing Pipeline Is Cooling: What the Latest Starts, Permits, and Completions Are Really Saying

The latest housing construction numbers are sending a clear message: new activity is slowing, planning is steadier, and the delivery side of the market looks uneven depending on the type of housing. If you only look at one line item, it is easy to miss the story. But once you line up monthly, 3-month, and annual changes together, the housing pipeline comes into focus.

1. Starts are cooling again
   Housing starts (total) fell -4.6% month over month, -12.3% over the latest 3-month window, and -7.8% year over year. That combination matters.

• The monthly decline suggests a near-term pullback in new construction starts.

• The 3-month decline shows it is not just a one-month blip.

• The year-over-year drop confirms the broader downshift in momentum.

When starts weaken, it usually shows up later in completions and overall supply delivery, especially if the “under construction” pipeline is already shrinking.

2. Permits look steadier than starts
   Total permits were almost flat month over month (-0.2%), slightly down year over year (-1.1%), but up over the latest 3 months (+3.7%).

This is the key divergence in the report: planning is not collapsing, but execution is. In practical terms, builders may still be filing permits, but delaying the point where projects actually break ground. That pattern often shows up when financing costs, demand uncertainty, or risk management pressures remain high.

3. The pipeline is thinning
   Under construction (total) was down -10.1% year over year, with smaller declines on a monthly (-0.2%) and 3-month (-2.1%) basis.

A year-over-year decline of this size implies fewer projects are actively moving through the build stage than a year ago. That makes it harder for completions to improve meaningfully later unless starts re-accelerate.

4. Completions are uneven, and multifamily deliveries are the weak spot
   Total completions rose +1.1% month over month, but were down -4.7% over 3 months and down -15.3% year over year. So the month-to-month improvement does not change the broader direction.

The most striking figure is multifamily (5+ units) completions: -8.9% month over month, -17.0% over 3 months, and -41.9% year over year.

That is a major slowdown in new multifamily deliveries relative to last year, which matters for rent supply dynamics and for regions where multifamily construction has carried much of the post-pandemic building cycle.

5. Single-family is holding up better on the delivery side
   Single-family starts rose +5.4% month over month, but were still down -8.1% over 3 months and -7.8% year over year. In other words, there was a monthly bounce, but the trend remains soft.

Single-family completions were the bright spot: +6.0% month over month, +0.3% over 3 months, and +2.0% year over year.

That suggests builders are still finishing and delivering single-family homes at a relatively steady pace compared with last year, even if they are cautious about starting new projects.

6. A telling detail: permits are strong for 5+ units, but starts are weak
   Multifamily (5+ units) permits rose +0.4% month over month, +11.3% over 3 months, and +17.9% year over year. Yet multifamily (5+ units) starts fell -25.9% month over month, -22.7% over 3 months, and -10.8% year over year.

This gap is important. It implies the constraints are not about “interest in building” as much as “ability or willingness to begin construction now.” Timing, capital, and underwriting conditions can cause exactly this kind of permits-up, starts-down divergence.

What this means for the housing market narrative

• Supply delivery is not accelerating in a broad, consistent way. Total completions remain materially lower than last year.

• Multifamily supply relief may be fading faster than the permit data alone would suggest, because starts and completions are weak.

• Single-family delivery is more resilient, but the forward-looking trend in starts is still negative on a 3-month and annual basis.

• If under construction continues to fall year over year, completions can remain constrained even if demand stabilizes.

What to watch next

• Whether total starts rebound or continue to decline on a 3-month basis.

• Whether the permits-to-starts gap closes, especially for 5+ unit projects.

• Whether “under construction” stabilizes, because that is the bridge between permits/starts and completions.

Today’s BLS employment situation, decoded with household indicators and labor-force flows

The BLS employment situation report is usually summarized with a few headlines (payrolls, unemployment rate, wages). But the real “feel” of the labor market often shows up in two places that get less attention:

1. household-side levels and ratios (participation, employment, not-in-labor-force details)

2. labor-force flows (who is moving between employment, unemployment, and not in the labor force)

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Part 1) Household-side indicators: headline easing, but slack may be shifting off-screen

What moved this month

Unemployment metrics improved on the month:

• Unemployment level: -3.6 m/m, -0.7 (3-month MA), +8.4 y/y

• Unemployment rate: -2.2 m/m, 0.0 (3-month MA), +7.3 y/y

Employment rose slightly:

• Employment level: +0.1 m/m, +0.1 (3-month MA), +1.5 y/y

• Employment-population ratio: +0.2 m/m, 0.0 (3-month MA), -0.3 y/y

But labor supply softened:

• Civilian labor force level: -0.0 m/m, +0.1 (3-month MA), +1.8 y/y

• Labor force participation rate: -0.2 m/m, -0.1 (3-month MA), -0.2 y/y

And the biggest flag in your table:

• Not in labor force – want a job now: +1.1 m/m, +2.2 (3-month MA), +12.4 y/y

How to read this mix

When the unemployment rate and unemployment level fall while participation also slips, it often means the labor market is “improving” partly because fewer people are being counted as active job seekers. That does not automatically mean demand is strong.

The sharp rise in “not in labor force – want a job now” is especially important. It suggests a growing pool of people who are not counted as unemployed, but still want work. In other words, slack can build outside the headline unemployment rate.

A simple interpretation:

• headline unemployment looks a bit better,

• the labor force is not expanding much,

• and hidden slack (people who want work but are not in the labor force) is rising quickly.

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Part 2) Labor-force flows: churn is rising, and that matters

Flows tell you how people are moving between states. They often turn before the headline rate does.

The most concerning flow

• Employed → Unemployed: +8.7 m/m, +1.0 (3-month MA), +8.9 y/y

That is a classic “separations are picking up” signal. Even if the unemployment rate is not jumping, a rising employed-to-unemployed flow usually means more people are losing jobs (or at least leaving employment into unemployment).

Hiring out of unemployment is not keeping up on trend

• Unemployed → Employed: +2.0 m/m, -3.1 (3-month MA), -7.4 y/y

This is one of the most important lines in your flow table. The month-to-month number is positive, but the trend is not. A negative 3-month average and negative y/y suggest the labor market is getting less effective at absorbing the unemployed back into jobs.

In-and-out of the labor force is accelerating

• Not in labor force → Employed: +2.9 m/m, +2.8 (3-month MA), +14.6 y/y

• Employed → Not in labor force: +1.4 m/m, 0.0 (3-month MA), +10.7 y/y

• Not in labor force → Unemployed: +0.6 m/m, +4.1 (3-month MA), +11.0 y/y

• Unemployed → Not in labor force: +1.4 m/m, +0.6 (3-month MA), +5.0 y/y

This tells a nuanced story:

• More people are entering employment from outside the labor force (a positive),

• but more people are also leaving employment into not-in-labor-force (a negative),

• and entries from not-in-labor-force into unemployment are rising, which can indicate job search is increasing but not immediately resulting in hiring.

Job-to-job looks quiet

• Employed → Employed (job-to-job): +0.1 m/m, +0.0 (3-month MA), +0.9 y/y

In strong labor markets, job-to-job churn tends to be higher (workers feel confident switching). A low, steady job-to-job flow fits a cooling environment.

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Putting it together: why the headline can look fine while the market feels weaker

If you combine both sets of signals:

1. unemployment is down on the month

2. participation is down on the month

3. “want a job now” is rising fast

4. employed-to-unemployed transitions jumped

5. unemployed-to-employed transitions look weaker on trend

…you get a picture of a labor market where pressure is building, but it is not being fully captured by the headline unemployment rate.

This is exactly how “quiet weakening” can happen:

• fewer people officially in the labor force,

• more people who want work but sit outside the unemployment definition,

• and higher churn into unemployment alongside slower re-absorption.

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What I would watch next month

If you want to confirm (or reject) the “hidden slack + rising churn” story, these are the highest-signal follow-ups:

1. Does employed → unemployed stay elevated, or does it revert?

2. Does unemployed → employed recover in the 3-month average?

3. Does “not in labor force – want a job now” keep rising y/y?

4. Does participation stabilize, or keep drifting lower?

5. Do hours worked and wage momentum cool (often the next shoe to drop)?

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Bottom line

Your tables suggest a labor market that is not breaking, but is subtly deteriorating in quality:

• The headline may look calmer in the short run,

• yet the underlying flows show more people falling from employment into unemployment,

• while the pipeline from unemployment back into jobs looks weaker on trend,

• and slack outside the official unemployment definition is rising quickly.

If you want, paste the top-line payroll/wage/revisions block from today’s release (or your percent-change table for payrolls by sector), and I’ll integrate it into this blog so it reads as one cohesive “full report” narrative with a tighter conclusion and a short market/policy implications section.

U.S. Private Payrolls: The Headline Is Flat, but the Mix Is Shifting Fast

When you look at the latest private payroll employment changes, the most important story isn’t the headline number. It’s where the gains and losses are happening.

The big takeaway: overall private hiring is essentially flat, while job declines are concentrated in white-collar sectors like Information and Professional & Business Services.

1. The surface looks calm: total private payroll growth is barely moving

Start with the aggregate:

• Total private payrolls: monthly 0.0%, 3-month average 0.0%, year-over-year 0.5%

Year-over-year, it’s still positive. But the monthly and 3-month trend are basically at stall speed. That matters because when momentum fades, the next question becomes whether weakness spreads—or whether the total rolls over into outright contraction.

2. The real signal: weakness is concentrated in specific sectors

The strongest message is coming from:

• Information: monthly -0.4%, 3-month -0.6%, YoY -1.6%

• Professional & Business Services: monthly -0.1%, 3-month -0.1%, YoY -0.2%

Information is not just soft this month—it’s negative on a year-over-year basis, which suggests a sustained downtrend. Professional & Business Services is also slightly negative YoY, adding to the pattern.

This combination often shows up when firms start tightening budgets: hiring freezes, reduced project spending, fewer new initiatives, and more caution around headcount in office-heavy roles.

3. Some areas are still expanding, but momentum is modest

There are still sectors holding up on a YoY basis:

• Natural Resources & Mining: 2.3%

• Leisure & Hospitality: 1.7%

• Financial Activities: 1.6%

• Construction: 1.1%

But the monthly and 3-month growth rates are small, which suggests these areas are growing slowly rather than accelerating. This looks more like a “slow-growth” labor market than a re-acceleration story.

4. Manufacturing remains soft: near zero to slightly negative

Manufacturing continues to signal weakness:

• Manufacturing: monthly -0.0% (slight decline), 3-month -0.1%, YoY -0.1%

It’s not collapsing, but it’s not providing lift either. Given manufacturing’s cyclical sensitivity, this also argues against a strong rebound in overall hiring.

5. What this implies for inflation

A stalling labor market, paired with declines in Information and Professional Services, typically points to gradually softer demand—generally a disinflationary direction over time.

However, as long as parts of services (like leisure/hospitality) remain positive, service inflation may cool more slowly. So the likely picture is disinflation with uneven speed across categories.

6. Three checkpoints I’m watching next

1. Does total private payroll YoY (0.5%) slide toward 0.0%

2. Do Information and Professional Services declines spread to other white-collar sectors

3. Does construction hold up or lose momentum further (rate sensitivity)

Bottom line

This doesn’t look like a labor market collapse. It looks like a labor market that’s slowing to a crawl—with job cuts concentrated in specific white-collar sectors.

That combination can gradually reshape sentiment, corporate spending, and the inflation path over the next few months.

This is a data-driven personal view, not financial advice.

📈 U.S. Productivity Surges in Q3 2025 — What This Means for the Economy

 The latest BLS report shows a strong rebound in U.S. labor productivity, signaling that the economy may be entering a new phase of efficiency-driven growth rather than inflation-driven expansion.

Here are the key takeaways:

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🔹 Labor Productivity: +4.9% (Annualized)

Output rose 5.4%, while hours worked increased only 0.5%.
This is one of the strongest productivity readings since before the pandemic — a sign that businesses are producing more with fewer additional labor hours.

📌 Over the past year, productivity is up 1.9%, well above the trend of the previous decade.

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🔹 Unit Labor Costs: –1.9%

Even with hourly compensation rising 2.9%, productivity grew faster — lowering business cost pressures.

This matters because:

• Lower unit labor costs → Less inflation pressure

• Higher productivity → Higher corporate margins

• More room for the Fed to consider rate cuts without risking an inflation rebound

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🔹 Manufacturing Is Rebounding

• Overall manufacturing productivity: +3.3%

• Durable goods: +4.7%

• Nondurable goods: +1.2%

This suggests that capital-intensive, high-value sectors (like technology and industrial equipment) are driving the improvement.

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🔹 Why This Matters

The combination of rising productivity and falling labor cost pressures is rare — and powerful.
It implies:

✅ The economy can grow without overheating
✅ Companies can protect margins despite wage growth
✅ Inflation can cool even as output rises
✅ AI and automation are beginning to show measurable macroeconomic impact

This is exactly the kind of environment policymakers and investors hope for.

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📊 Visual: Quarterly Productivity Trend (2022–2025)

I created the following chart to visualize trends over time, including the average growth rate:

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If you’d like a deeper dive into sector-level trends, historical series, or inflation implications, feel free to connect!