Housing Starts Rebound in June, Leading Economic Indicators Gain: July 17 – 21

Housing construction rebounded in June while leading economic indicators point towards accelerated economic activity during the latter half of this year. Here are the five things we learned from U.S. economic data released during the week ending July 21.

#1Housing construction jumped in June. Per the Census Bureau, housing starts were at a seasonally adjusted annualized rate (SAAR) of 1.215 million units, up 8.3 percent from May, 2.1 percent from a year earlier and its highest point since February. This had followed three consecutive monthly declines in starts. The annualized rate of single-family home starts grew 6.3 percent during the month to 849,000 units (+10.3 percent) while that for multifamily units surged 15.4 percent to 359,000 (off 10.7 percent from the year ago pace). Looking towards the future, the number of issued building permits jumped 7.4 percent during the month to 1.168 million permits (5.1 percent above the June 2016 rate). Housing completions increased 5.2 percent during June to an annualized rate of 1.144 million units. This was 8.1 percent ahead of the completions rate of a year earlier.Housing Starts-2006-2017-072117

#2Homebuilders were (slightly) less confident in July. The Housing Market Index (HMI) from the National Association of Home Builders shed two points to a seasonally adjusted reading of 64. While this was the HMI’s lowest mark since last November, it was still up six points from a year earlier and the 37th straight month in the measure was above a reading of 50, indicating more builders described housing conditions as “good” rather than “poor.” The HMI fell in two of four Census regions—South (down five points to 68) and Midwest (down four points to 64) but gained in the West (up three points to 74) and the Northeast (up two points to 48). Shedding two points were indices for both current and expected sales (to 70 and 73, respectively) while the measure of prospective buyers traffic slipped a point to 48. The press release described overall confidence as “solid,” but noted that homebuilders were “growing increasingly concerned over rising material prices, particularly lumber” that was “hurting housing affordability even as consumer interest in the new-home market remains strong.”

#3Forward looking economic indicators suggests greater economic growth for the rest of this year. The Conference Board’s Leading Economic Index (LEI) jumped by 8/10ths of a point during June to a seasonally adjusted 127.8 (2010=100). This represented nearly a four percent increase over the past year. Eight of the LEI’s ten component made a positive contribution to the index, led by housing building permits, manufacturing new orders, and the interest rate spread. Both the coincident index and the lagging index added 2/10ths of a point to 115.5 and 124.4, respectively. All four components of the coincident index made positive contributions, including nonfarm payrolls and industrial production. Four of seven components to the lagging index made positive contributions, led by the average prime rate charged by banks. The press release said the Conference Board expects “continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year.”

#4Employers added workers in 14 states during June. Detailed state-level employment data from June released by the Bureau of Labor Statistics finds nonfarm payrolls grew by a statistically significant amount in 14 states but were “essentially” unchanged in the other 36 states and the District of Columbia. States with the largest payroll gains during June were Texas (+40,200), Georgia (+27,400), New York (+26,000), and Maryland (+13,300). Thirty-nine states enjoyed significant employment gains over the past year but held steady in the other 11 states and in the District of Columbia. The states with the largest year-to-year percentage gains in nonfarm payrolls were Nevada (+3.8 percent), Utah (+3.0 percent), and Florida (+2.9 percent).

#5Bankruptcy filings continue to decline. The Administrative Office of the U.S. Courts reports that there were 796,037 bankruptcy filings during the 12 month period through June 30, 2017. This was off 2.8 percent from the same 12-month period a year earlier and down 30.0 percent from the 12-month count of four years earlier. There were 23,443 business bankruptcy filings during the 12-month period ending June 30, 2017 (down 7.1 percent from a year ago) and 772,594 non-business filings (down 2.7 percent from a year earlier). 

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 15, 2017, First-Time Claims, seasonally adjusted): 233,000 (-15,000 vs. previous week; -25,000 vs. the same week a year earlier). 4-week moving average: 2435,750 (-6.1% vs. the same week a year earlier).
Import Prices (June 2017, not seasonally adjusted):  -0.2% vs. May 2017, +1.5% vs. June 2016. Nonfuel imports: +0.1% vs. May 2017, +1.0% vs. June 2016.
Export Prices (June 2017, not seasonally adjusted):  -0.2% vs. May 2017, +0.6% vs. June 2016. Nonagricultural exports: unchanged vs. May 2017, +1.1% vs. June 2016.
Treasury International Capital Flows (May 2017, Net Foreigner Purchases of Domestic Securities, not seasonally adjusted): +$95.5 billion (vs. April 2017: +$3.8 billion, vs. May 2016: +$16.3 billion).

The opinions expressed here are not necessarily those of Kevin’s current and previous employers. No endorsements are implied.

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