Housing Construction Slows Down – US Economic Update

Market-Update-E Jansen


Winter slowed the pace of housing construction, while layoffs continued to drop and core inflation saw a sizable gain.

Housing Starts

January’s cold snap had its impact on real estate as housing starts and building permits both contracted during the month.

Permits issued for housing units of all types dipped to an annual rate of 1,202,000 for the month, marking a 0.2 percent decline from the December rate of 1,204,000, according to last week’s report from the Census Bureau. Similarly, permits issued for single-family homes in January notched down to a rate of 720,000, which was a 1.6 percent decline from December’s pace of 732,000.

Actual starts on housing units of all types in January dropped to an annual rate of 1,099,000, which was 3.8 percent down from December’s rate of 1,143,000. Starts on single-family homes fell to a rate of 731,000, which was 3.9 percent off from December’s rate of 761,000.

“Despite the modest dip in starts this month, we expect to see ongoing, gradual growth in housing production in 2016,” National Association of Home Builders’ Chief Economist David Crowe wrote in a public statement. “An improving economy, solid job creation and pent-up demand for housing should keep the market moving forward.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending February 13 fell to 262,000, a decline of 7,000 claims from the prior week’s level of 269,000, the Employment and Training Administration reported last week. This followed the preceding report’s 16,000-claim drop and completely ran contrary to analysts’ expectations that initial jobless claims would hit 274,000.

“Even though it gives us only one side of the labor-market ledger, jobless claims are effectively a gauge on overall business sentiment,” Millan Mulraine, deputy head of U.S. research and strategy for TD Securities USA LLC, told Bloomberg. “[The Administration’s report is] a good indication that businesses are more inclined to hold on to what they have and add to that, as opposed to reducing their payrolls.”

The four-week moving average — considered a more stable measure of layoffs — saw a similarly sized drop, falling to 273,250, a drop of 8,000 claims from the previous week’s average of 281,250.

Consumer Price Index

Meanwhile, core consumer prices for January saw their biggest increase since 2011, according to last week’s report from the Bureau of Labor Statistics.

While overall consumer prices, known as the Consumer Price Index for All Urban Consumers (CPI-U), was flat for the month, the index for all items less food and energy, otherwise known as core inflation, rose 0.3 percent in January. This offset a 2.8 percent decline in the energy index.

Compared annually, the index for all items less food and energy gradually increased 2.2 percent since January 2015.

This week we can expect:

  • Tuesday — Consumer confidence for February from The Conference Board; existing home sales for January from the National Association of Realtors.
  • Wednesday — New home sales for January from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for January from the Census Bureau.
  • Friday — Second estimate of Fourth Quarter gross domestic product and personal incomes and expenditures for January from the Bureau of Economic Analysis; consumer sentiment for February from the University of Michigan and Thomson-Reuters Survey of Consumers.