Sluggish Housing Starts Belie Builders’ Confidence U.S. home building is off to a slow start this year, though builders remain upbeat amid improving weather, steady job creation and low interest rates.
U.S. housing starts rose 2% from a month earlier to a seasonally adjusted annual rate of 926,000 in March, the Commerce Department said Thursday. So far this year starts are averaging only 969,000 a month, compared with just over 1 million last year.
Starts on single-family units, which exclude apartments and represent almost two-thirds of the market, climbed 4.4%. Multifamily units, including apartments and condominiums, fell 2.5%. New applications for building permits, a bellwether for construction in coming months, declined 5.7%.
From a year earlier, overall U.S. housing starts were down 2.5% in March while permits rose 2.9%.
Regionally, only the South is seeing some upward momentum:
(…) consider that the first-quarter total of permits issued for single-family homes shows a 5.6% increase from last year’s first quarter. In the same span, actual construction starts for single-family homes are up 4.4%. That’s not a gangbusters gain, but it is a healthy increase for a first quarter rocked by harsh weather in some regions.
Real estate website Zillow Inc. estimates that 5.2 million U.S. renters are interested in buying homes, based on its market surveys done earlier this year.
Philly Fed Beats Expectations
The Philly Fed ADS Business Conditions Index
The Philly Fed’s Aruoba-Diebold-Scotti Business Conditions Index (hereafter the ADS index) is a fascinating but relatively little known real-time indicator of business conditions for the U.S. economy, not just the Third Federal Reserve District, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Thus it is comparable to the better-known Chicago Fed’s National Activity Index (more about the comparison below).
Named for the three economists who devised it, the index, as described on its home page, “is designed to track real business conditions at high frequency.”
The index is based on six underlying data series:
- Weekly initial jobless claims
- Monthly payroll employment
- Industrial production
- Personal income less transfer payments
- Manufacturing and trade sales
- Quarterly real GDP
Doug Short provides a smoothed, longer-term version of the index, showing that it is seldom as weak as it currently is:
Hence:
Fed Shies Away From June Rate Increase A patch of soft economic data has created uncertainty inside the Federal Reserve about when to start raising short-term interest rates, reducing the probability of a move by midyear.
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Fed’s Lockhart’s Uncertain Outlook Drives Him to Cautious View on Rate Rises Federal Reserve Bank of Atlanta President Dennis Lockhart said Thursday that unexpected economic weakness over the start of the year means it will likely take longer to gain enough confidence in the outlook to raise short-term interest rates.
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Fed’s Fischer Says There Are Signs of Pickup in U.S. Wages
Moving target:
European Prices Fall for Fourth Month
Eurostat on Friday said consumer prices in the 28-nation bloc fell 0.1% in March from a year earlier, and confirmed data that showed prices in the eurozone were also 0.1% lower. In February, prices fell by 0.3% in the EU as a whole, a figure that was revised from an earlier estimate of 0.2%.
Twelve EU members experienced an annual decline in consumer prices in March, down from 20 in February.
Core inflation has picked up considerably, rising 1.4% MoM in the Euro area and 1.0% in the EU. That is after rising 0.6% and 0.5% respectively in February. Core prices had dropped 1.9% and 1.5% respectively MoM on January so Q1 core inflation is about zero. (Eurostat)
CHINA ALSO NOT STARTING UP
Compared to 2014, post-Lunar New Year production activity has been noticeably weaker this year. The month-over-month deterioration in activity relative to expectations has cast a shadow over sector respondents’ expectations for activity in April. Feedback indicates that recent monetary easing has not materially boosted downstream demand and confidence. To the contrary, a majority of property developer respondents don’t expect recent sector and monetary easing measures to significantly boost homebuyer demand beyond the short-term, thus plans for future investment remain cautious. The long-term outlook for the property sector looks subdued but stable. Steel sector activity observed a slight improvement in March following post-Lunar New Year production resumption, while cement sales fell below expectations.
Exporters surveyed by CEBM indicated external demand is weakening. Export-oriented manufacturing firms are also slow in resuming production due to the late arrival of workers. Demand for working capital loans has improved moderately but commercial banks surveyed by CEBM indicate that demand for loans for investment purposes remain weak. Banks continue to be cautious about property sector lending. This behavior has curtailed the amount of loans for property development purposes. (CEBM Research)
EARNINGS WATCH
Today’s headlines:
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Wall Street’s Profit Engines Hum Goldman Sachs, Citigroup and Blackstone posted blowout earnings, signaling that many of the financial industry’s cylinders are firing.
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Wall Street earnings signal end of malaise Profits from Goldman and Citi boost hope of cyclical recovery
Here are the plain facts as tallied by RBC Capital:
- 54 companies (16.6% of the S&P 500’s market cap) have reported. Earnings ex-Financials are beating by 5.5% while revenues have missed by 0.6%.
- Expectations are for a decline in revenue, earnings, and EPS of -2.9%, -3.5%, and -2.0% (was -2.6% 2 days ago).
- Excluding Energy, growth would be 2.7%, 4.4%, and 6.2% (was 5.6% 2 days ago), respectively. This excludes the likelihood of beats, which have come in above 4% historically.
So far, so good!