This is a post from Jim Haughey's blog that covers the US construction industry.
Jim Haughey is the Chief Economist for Reed Construction Data and has over thirty years experience as a business economist, including twenty years monitoring the construction market. He has a Ph.D. degree in economics from the University of Michigan and has previously taught at the University of Michigan, Ohio University, Michigan State University and the University of Massachusetts.
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Construction Industry Forecasts
Notes from Jim Haughey - Jun 16, 2011
The slowdown in GDP growth from 3% + to at most 2% in the first half of 2011 was set off by higher energy prices, the Japanese parts shortage and the high probability of a Greek bond default. Auto, consumer durables and manufacturing took direct hits but the rest of the economy is getting a negative spillover impact which did not fully reach the housing market in May. The NAHB builders’ confidence index dropped sharply in June to near the recession low level so no significant pickup in housing starts is likely in June and possible July.
Housing starts remain constrained by the lingering bad debts from the 2008 credit crisis. But that constraint is not now binding. There is now enough credit and enough credit worthy borrowers at current credit approval standards and loan terms to support housing starts well above 650,000 – perhaps as high as 1.0 million. Beyond that level the credit constraint would be binding. But until that level of starts is reached, the effective constraint on housing starts is the combination of very low consumer confidence, depressed real incomes and still falling home prices.
