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Economic Nuggets – August 31, 2012

0 1312 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. July total commercial construction spending: $834.4 billion at a seasonally adjusted annual rate (SAAR), down 0.9% from June; but up 9.3% year-to-date compared to the same period last year. Major categories include:
    • Nonresidential construction spending: $298.8 billion, down 0.7% from June; year-to-date up 8.4% from the same period last year
    • Heavy engineering construction spending: $264.3 billion, down 0.6% from June; year-to-date up 10.7% from the same period last year
    • New residential construction spending: $155.4 billion, up 1.5% from June; year-to-date up 13.9% from the same period last year
  1. The Bureau of Economic Analysis (BEA) revised second quarter real (inflation-adjusted) gross domestic product (GDP) growth from the previously reported 1.5% (SAAR) to 1.7%. After the revision, growth was still down from first quarter’s 2.0% rate

    The revisions include an increase in the rate of growth of the following:

    • Investment in structures - 0.9% (SAAR) to 2.8%
    • Personal consumption expenditures - 1.5% to 1.7% (the consumer is still with us, but is cautious)
    • Exports - 5.3% to 6.0% (the rest of the world continues to grow and demand U.S. products)
  1. Single-family housing starts fell in July to 502,000 (SAAR) from 537,000 in June. That marked the fourth consecutive month of 500,000+ single-family starts. On the positive side, single-family housing permits rose 4.1% in July, their fourth consecutive monthly increase.
  2. New single-family home sales rebounded 3.6% in July to 372,000 (SAAR) from June’s 359,000 (revised up from 350,000). Also, July sales were 25.9% higher than last year.
  3. The inventory of new single-family homes for sale was at a record low 142,000. Any increase in demand for new homes will have to be met with additional new construction.
  4. The 10-city and 20-city June S&P/Case-Shiller® Home Price indexes advanced for the fifth consecutive month, up 1.0% and 0.9%, respectively, on a seasonally adjusted (SA) basis. Also, both were up on a year-over-year basis, 0.1% and 0.5%, respectively. The quarterly national index rose 2.2% (SA) for the second quarter in a row and was up 1.2% from second quarter 2011. Rising home prices should give potential buyers more confidence to make a home purchase and lenders a greater willingness to extend loans to both buyers and builders.
  5. The August NAHB/Wells Fargo Housing Market Index (HMI) was up 2 points to 37 after jumping 6 points in July. The August reading is the highest the index has been since February 2007, indicating that homebuilders are increasingly confident that the single-family housing market is improving. Typically, within one to two months after the HMI rises, single-family housing starts increase.
  6. Multifamily housing starts increased 12.4% for the second month in a row to 244,000 (SAAR) from 217,000 in June. Given the volatility of the measure, the 3-month moving average provides a better picture of new activity. The average rose slightly from June, up 0.2% to 218,000.
  7. July’s 3-month moving average of 287,000 multifamily building permits, a 6.3% rebound from June’s 4.0% decline, was its highest average since September 2008.
  8. The AIA Billings Index leapt up almost 3 points to 48.7 from 45.9 in June, its second monthly improvement. Nonetheless, this leaves the index below 50, indicating decreased billings.
  9. The July Producer Price Index (PPI) for finished goods rose 0.3% (SA) following a 0.1% increase in June and was up a modest 0.5% from July 2011.
  10. An index that measures inputs used in nonresidential construction (excluding capital equipment) fell 0.9% on a not seasonally adjusted (NSA) basis, its third consecutive monthly decline. On a year-over-year basis, the index was down 1.2%. This is likely to be a temporary respite in building materials costs as energy prices have moved up and steel prices have jumped in recent weeks. 
  11. The July Consumer Price Index (CPI) was flat for the second month in a row and was up 1.4% from July 2011. The core CPI, which excludes food and energy prices, was up 0.1% for the month and 2.1% from a year earlier.

by Bernie Markstein

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