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ECONOMIC NUGGETS – November 1, 2012

0 1213 Market Intelligence

Bernie Markstein

Positions: Chief Economist
Well known for his work as Senior Economist and Vice President of Economic Forecasting and Analysis for the National Association of Home Builders (NAHB), Dr. Markstein has provided analysis on national and regional housing issues; tracking developments, trends in the multifamily housing market and forces affecting building materials prices.

Economic nuggets from the past two weeks/' news headlines and industry publications.

Here are some economic nuggets from the past two weeks’ news headlines and industry publications.

  1. Total commercial construction spending advanced 0.6% to $851.6 billion at a seasonally adjusted annual rate (SAAR) in September. Year-to-date not seasonally adjusted (NSA) spending rose 8.9% from the same period in 2011. Total spending for September incorporated the following:
    • Nonresidential construction spending fell 1.4% to $294.4 billion, but was 6.4% higher on a year-to-date basis compared to a year ago
    • Heavy engineering construction spending rose 0.7% to $265.0 billion and was up 8.6% year-to-date
    • New residential construction spending shot up 3.3% to $165.3 billion and stood 16.1% higher year-to-date
  1. Third quarter real (inflation-adjusted) gross domestic product (GDP) grew 2.0% at a seasonally adjusted annual rate (SAAR). This was a bounce back from the second quarter’s 1.3% rate.
  2. The drought that blanketed much of the nation appears to have reduced second quarter growth by 0.2% and third quarter growth by 0.4%. The impact of the drought on the economy is temporary and will soon cease to be a negative.
  3. Investment in residential construction grew 14.4% (SAAR) in the third quarter, the sixth consecutive quarterly increase, and added 0.3% to real GDP growth. Meanwhile, investment in nonresidential structures fell 4.4%, ending five consecutive quarterly increases and subtracting 0.1% from its growth.
  4. Single-family housing starts increased a robust 11.0% in September to 603,000 (SAAR) from 543,000 in August. Single-family housing permits rose a solid 7.6% to 550,000 for the month, following no change in August. For the third quarter, single-family starts were up 6.7% and building permits were up 8.0%.
  5. New single-family home sales rebounded 5.7% in September to 389,000 (SAAR), after falling 1.3% the month before. September sales were at their highest level since April 2010 when a homebuyer tax credit stimulated sales.
  6. For the seventh consecutive month, the 10-city and 20-city July S&P/Case-Shiller® Home Price indexes were up. The 10-city index increased 0.4% on a seasonally adjusted (SA) basis and the 20-city index 0.5%. The 10-city index was up a solid 1.3% on a year-over-year (NSA) basis, and the 20-city index was up an even stronger 2.0%.
  7. The October NAHB/Wells Fargo Housing Market Index (HMI) inched up a point to 41, marking the sixth month in a row that the index was up. The October index is the highest it has been in over six years, a definite positive for the single-family construction market.
  8. The homeownership rate fell from 65.6% (SA) in the second quarter to 65.3% in the third quarter—the lowest the rate has been since first quarter 1996. Over the same two quarters this year, the NSA rental vacancy rate held steady at 8.6%. In the third quarter of 2011, the rental vacancy rate was over 1% higher: 9.8%.
  9. Multifamily housing starts surged 25.1% to 269,000 (SAAR) in September following a 3.2% decline from the previous month. The 3-month moving average, which smoothes out the erratic monthly moves, increased 7.0% to 235,000. Year-to-date (NSA) starts increased 34.6% over 2011.
  10. The 3-month moving average for September multifamily building permits rose 9.3% to 313,000 from August’s 286,000. Year-to-date (NSA) permits were up 45.2%.
  11. The AIA Billings Index rose for the fourth month in a row and for the second month in a row since March was above 50, advancing to 51.6 from 50.2 in August. An index number above 50 denotes higher billings.
  12. The September Producer Price Index (PPI) for finished goods increased 1.1% (SA) after jumping 1.7% in August. Both of the monthly increases were largely due to higher energy prices. The index was up 2.1% (NSA) on a year-over-year basis.
  13. An index that measures the prices of inputs used in nonresidential construction, which excludes capital equipment, was 1.2% higher on a not seasonally adjusted (NSA) basis in September after an almost as strong 1.0% increase in August. The index was up 1.6% from a year earlier.
  14. The third quarter Employment Cost Index (ECI) for total compensation rose a moderate 0.4% (SA). The rate of increase for benefit costs was more than double that for wages—0.8% vs. 0.3%. On a NSA year-over-year basis, the total ECI was up 2.0%.
  15. The September Consumer Price Index (CPI) advanced 0.6% for the second month in a row and increased 2.0% (NSA) from September 2011. For the third consecutive month, the core CPI (which excludes food and energy prices) rose a modest 0.1% and was 2.0% (NSA) higher than September 2011.

by Bernie Markstein

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