Fortunately, the New Year will ring in some further positive economic signs, as both December ISM leading indicators should point upwards, December motor vehicle sales will find some year-end lift, and payroll employment is projected to bounce back from a November slump. Construction spending, however, will pull back, but that should not overly contaminate the New Year's punch bowl.

In other developments, Federal Reserve chairman Ben Bernanke will be providing an economic and policy outlook update to the Senate budget panel on January 7. At this point, we do not expect Bernanke to blink in terms of the broad thrust of monetary policy initiatives—inflation continues to track below the Fed's target and the unemployment rate is hovering just below 10%. Also, the earnings season will start to gear up, and the recent improvement in spending momentum in the economy should provide some leverage to profits.

Corporate cost-containment clamps have remained firmly in place, especially on the employment front, where private payroll growth remained subdued in the fourth quarter, at about the same rate as in the third quarter.

KEY U.S. DATA RELEASES THIS WEEK

Monday, January 3 – Construction Spending (Nov.)

Construction Put in Place

• IHS Global Insight: -0.2%
• Consensus: 0.2%
• Last Actual: 0.7% (Oct.)

Construction Excl. Residential Improvements

• IHS Global Insight: -0.2%
• Last Actual: -0.2% (Oct.)

What to Look For

• Overall, we expect construction spending to drop 0.2% in November.

Implications

We expect nonresidential and multi-family residential construction to drop by 1% or more. Single-family residential should also drop, but by less than 0.5%. These declines will offset increased spending on infrastructure. This pattern—declining nonresidential and residential spending, and rising infrastructure spending—is likely to continue for several months.

Monday, January 3 – ISM Manufacturing Index (Dec.)

• IHS Global Insight: 60.0
• Consensus: 56.9
• Last Actual: 56.6 (Nov.)

What to Look For

• We project a strong December reading of 60.0, up from 56.6 in November.

Implications

Regional surveys—notably the big guns in Chicago, Richmond, and Philadelphia—pointed to an acceleration in manufacturing growth as the old year closed out. Consumer spending appears to be picking up, and that could well have led to some inventory reductions at the end of the year.

Tuesday, January 4 – Motor Vehicle Sales (Dec.)

• IHS Global Insight: 12.4 Mil.
• Consensus: 12.3 Mil.
• Last Actual: 12.2 Mil. (Nov.)

What to Look For

• We expect December light-vehicle sales to come in at 12.4-million units (annual rate), a modest pickup from 12.2 million in November.

Implications

Sales at the end of the year are picking up, aided by marketing programs and sales incentives. A projected acceleration to 12.4-million units (annual rate) in December would deliver sales of close to 11.5 million for 2010 overall. With the economy getting an additional jolt from recent fiscal stimulus measures passed by Congress, we have raised our forecast for 2011 sales to 13.1-million units, up from our previous forecast of 12.8 million.

Wednesday, January 5 – ISM Non-Manufacturing Index (Dec.)

• IHS Global Insight: 55.7
• Consensus: 55.5
• Last Actual: 55.0 (Nov.)

What to Look For

• The ISM index for non-manufacturing is expected to bounce up nearly a point, to 55.7 in December.

Implications

Crosscurrents continue to move in both directions, with financial markets, employment conditions, and business activity improving. However, orders momentum remains modest and freight activity is taking a step back after a couple of months of gains. On net, we are looking for a modest gain in the overall index.

Friday, January 7 – Employment Report (Dec.)

Nonfarm Payrolls

• IHS Global Insight: 150,000
• Consensus: 135,000
• Last Actual: 39,000 (Nov.)

Unemployment Rate

• IHS Global Insight: 9.7%
• Consensus: 9.7%
• Last Actual: 9.8% (Nov.)

Average Hourly Earnings

• IHS Global Insight: 0.2%
• Consensus: 0.2%
• Last Actual: 0.0% (Nov.)

What to Look For

• Payroll employment gains to bounce up to 150,000.
• Unemployment rate to edge down to 9.7%.

Implications

Continuing declines in initial unemployment insurance claims indicate that the very weak November employment report was an aberration. We expect payroll employment gains to improve to 150,000 in December, from just 39,000 in November, and the unemployment rate to edge down from 9.8% to 9.7%. Firms are becoming more confident in the expansion, and hiring is improving as a result.