September 17, 2020 | 08:58
Multis Weigh on Housing Starts
Three times the charm?
The three main data releases this week were consistent in their message... that they are recovering in fits and starts. First industrial production, then retail sales, and now, housing.
U.S. housing starts fell 5.1% in August, weaker than expected and the lowest level since May. But the details were not too concerning. There were upward revisions, on net, to the prior two months though .... July to 1.492 mln (was 1.496) and June to 1.265 (was 1.220). And, all of the decline was in the multi-unit category (-22.7%); single-family homes, which account for over 70% of total starts (and is what many "let's move out of the city into the 'burbs cuz I'm WFH now" types are looking for), rose for the fourth consecutive month to its highest level since February. Building permits unexpectedly slipped, down 0.9% to 1.47 after surging 17.9% in the prior month. But this barely dents the massive increases that were racked up over the past three months. Plus, all of the permits being applied for were for singles (again), while multis fell. And note that the gap between starts and permits is positive again, pointing to more ground-building work (literally) ahead.
Besides, builders are in exceptionally good spirits (note that the NAHB housing index hit a record high in September), even as they deal with high lumber prices, stemming from the West Coast fires. Our Dr. Mark Wilde, Packaging & Forest Products Analyst, expects lumber prices to fall significantly as cooler weather moves in.
In another release, another region (Philadelphia) reported an increase in manufacturing activity this month. The Philly Fed Index rose 3.2 pts to 52.5 on an ISM-adjusted basis; in other words, factories there are expanding at their fastest pace in seven months.
So.... this should translate into more demand for workers. Right? And there was encouraging news on that front. U.S. initial claims for the survey week of September 12 fell 33k to 860k, the lowest since mid-March. Continuing claims, meantime, which measure those who are still on UI, were down a steep 916k to 12,628k in the first week of September, the lowest since April.
The Bottom Line: As mentioned yesterday, the economic recovery is moving forward in fits and starts. The drop in UI claims is welcome news, though the move itself is slow. Indeed, it is going to be a "long road to maximum employment".
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