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ECONOMIC NUGGETS – October 1, 2012

0 1221 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.

Economists

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. The Bureau of Economic Analysis (BEA) revised down its estimate of second quarter real (inflation-adjusted) gross domestic product (GDP) growth to 1.3% at a seasonally adjusted annual rate (SAAR) from the previously reported 1.7%. Part of the downward revision was due to the effects of the drought on the economy, which should prove to be a temporary drag on growth. The downward revision in nonresidential construction spending was another factor in the slower growth estimate.
  2. August total commercial construction spending fell for the second month in a row, down 0.6% to $837.1 billion (SAAR), although year-to-date not seasonally adjusted (NSA) spending was still up 9.0% over last year. The August spending numbers include the following movements:
    • Nonresidential construction spending declined 1.2% to $296.4 billion, but rose 7.3% year-to-date from last year
    • Heavy engineering construction spending dropped 1.4% to $260.8 billion, but was 9.5% higher on a year-to-date from the same period in 2011
    • New residential construction spending jumped 2.9% to $160.0 billion and increased 14.8% on a year-to-date basis from last year
  1. Single-family housing starts increased 5.5% in August to 535,000 (SAAR) from 507,000 in July. There have now been five consecutive months of single-family starts in excess of 500,000. Meanwhile, single-family housing permits were unchanged from July, but were up 20.3% from last year on a year-to-date (NSA) basis.
  2. New single-family home sales slipped a bit, down 0.3% to 373,000 (SAAR) after increasing 3.6% in July to 374,000, but were up 22.5% on a year-to-date (NSA) basis from last year.
  3. The inventory of new single-family homes for sale remained at their record low of 141,000 for the second month in a row. Given the low level, builders will respond to higher demand with new construction.
  4. The 10-city and 20-city July S&P/Case-Shiller® Home Price indexes increased for the sixth month in a row, both rising 0.4% on a seasonally adjusted (SA) basis. On a year-over-year (NSA) basis, the 10-city index rose 0.6% and the 20-city index 1.2%. The upward movement in home prices is a positive for home buyers, home sellers, builders, lenders—and the economy.
  5. The September NAHB/Wells Fargo Housing Market Index (HMI) increased 3 points to 40, its fifth consecutive monthly increase. The September index is the highest it has been since June 2006, a major sign that builders are more positive in their outlook for the new single-family home market. Higher HMI readings usually precede a rise in single-family housing starts by one or two months.
  6. August multifamily housing starts fell 4.9% to 215,000 (SAAR) after increasing 4.1% to 226,000 in July. The 3-month moving average, a better take on this volatile measure, rose 3.5% to 219,000. Year-to-date (NSA), starts were up 36.8%.
  7. The August 3-month moving average for multifamily building permits slipped 0.3% to 287,000 from July’s 288,000. Year-to-date (NSA), permits were up 41.6%.
  8. The AIA Billings Index continued its recent upward movement, rising to 50.2 from July’s 48.7, the first time the index has been above 50 since March. A reading above 50 indicates increased billings.
  9. The August Producer Price Index (PPI) for finished goods shot up 1.7% (SA) due to higher energy prices after increasing a more modest 0.3% in July and was 2.0% (NSA) higher than August 2011.
  10. A price index for inputs used in nonresidential construction (excluding capital equipment) increased 1.0% on a not seasonally adjusted (NSA) basis in August after falling 0.9% the previous month. On a year-over-year basis, the index was up a modest 0.7%. Higher energy prices will keep upward pressure on building materials prices in the near term.
  11. The August Consumer Price Index (CPI) rose 0.6% after no change the previous two months and was up 1.7% (NSA) from a year earlier. The core CPI (which excludes food and energy prices) inched up 0.1% for the second month in a row and was up 1.9% (NSA) from August 2011.

by Bernie Markstein

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