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Report from
North America
Housing starts stumble in September
Homebuilding unexpectedly fell in September and permits
dropped to a one-year low amid acute shortages of raw
materials and labour fueling expectations that economic
growth slowed sharply in the third quarter.
The report from the US Department of Commerce also
showed the gap between completed homes and those still
under construction was the largest on record last month.
Robust demand as global economies emerge from the
COVID-19 pandemic is running against worker shortages,
straining supply chains and fanning inflation. Nearly every
industry in the United States is experiencing shortages.
Housing starts dropped 1.6% to a seasonally adjusted
annual rate of 1.555 million units last month, the lowest
level since April. Data for August was revised down to a
rate of 1.580 million units from the previously reported
1.615 million units.
Economists polled by Reuters had forecast starts would
rise to a rate of 1.620 million units. Softwood sawnwood
prices are rising again after tumbling from record highs set
in May. Starts have declined from the 1.725 million unitpace
level scaled in March, which was more than a 14-1/2-
year high.
Single-family starts were unchanged at a rate of 1.080
million units last month. Single-family homebuilding rose
in the West and Midwest but fell in the Northeast and the
densely populated South, also likely depressed by
Hurricane Ida, which caused unprecedented flooding.
A survey from the National Association of Home Builders
showed confidence among single-family homebuilders
rising further in October but noted that "builders continue
to grapple with ongoing supply chain disruptions and
labour shortages that are delaying completion times."
Canadian housing starts also fell in September, as
construction activity pulled back in urban areas although it
remained high on a historical basis. Housing starts for
September came in at a seasonally adjusted annualized
rate of 251,151 units, a 4.4% decrease from 270,744 units
in August.
See:
https://www.census.gov/construction/nrc/index.html
and
https://www.cmhc-schl.gc.ca/en/professionals/housing-marketsdata-and-research/housing-data
Sales of existing homes rise on low mortgage rates
Sales of previously owned homes increased 7% to a
seasonally adjusted annualised rate of 6.29 million units in
September according to the National Association of
Realtors. The organisation¡¯s chief economist, Lawrence
Yun, pointed to a brief drop in mortgage interest rates in
August for the sales gain. The average rate on the 30-year
fixed mortgage fell below 3% before rising again more
significantly last month. Sales were 2.3% lower than in
September 2020.
The supply of homes for sale ended September at 1.27
million units, down 13% from a year ago. That represents
a 2.4-month supply at the current sales pace. Low supply
continued to push prices higher, 13.3% higher than
September 2020. The annual gains, while high, are now
moderating.
¡°As mortgage forbearance programmes end and as
homebuilders ramp up production, despite the supplychain
material issues, we are likely to see more homes on
the market as soon as 2022,¡± said Yun.
Existing-home sales in the Northeast grew 5.5% in
September, posting an annual rate of 770,000, an 8.3%
decrease from September 2020. Existing-home sales in the
Midwest rose 5.1% to an annual rate of 1,440,000 in
September, a 2.7% drop from a year ago.
Existing-home sales in the South jumped 8.6% in
September, recording an annual rate of 2,770,000,
unchanged from one year ago and existing-home sales in
the West climbed 6.5%, registering an annual rate of
1,310,000 in September, down 3.0% from one year ago.
See:
https://www.nar.realtor/newsroom/existing-home-salesrecede-2-0-in-august
Job creation falls well below expectations
America's economic recovery has hit a roadblock, US
employers added only 194,000 jobs in September, another
troubling sign that Covid continues to disrupt the
economy. It marked the second straight month in which
the US economy added far fewer jobs than expected. Jobs
growth slowed down dramatically in August.
The unemployment rate declined to 4.8% in September,
the Bureau of Labor Statistics reported, down from 5.2%
in August. Joblessness declined across the board.
Employment in manufacturing increased by 26,000 in
September but is down by 353,000 since February 2020.
Similarly, construction employment rose by 22,000 in
September but has shown little net change thus far this
year and is 201,000 below its February 2020 level.
The report did have some good news: the disappointing
August report was revised higher by 131,000 jobs, which
means employers added 366,000 the month before last.
Also, the surveys behind the latest jobs report were
completed around the middle of September when Covid
infections began to plateau. Covid has been on a steady
decline since mid-September and hiring ramped up toward
the end of the month, a reason to be hopeful about job
growth in October.
Covid and inflation hold down consumer sentiment
Consumer sentiment in the U.S. fell slightly in early
October as the spread of the Covid-19 Delta variant and
supply-chain strains weighed on Americans' mood.
The preliminary estimate of the index of consumer
sentiment by the University of Michigan decreased to 71.4
in October from 72.8 in September. The reading missed
estimates from economists polled by The Wall Street
Journal.
"The Delta variant, supply-chain shortages, and reduced
labor-force-participation rates will continue to dim the
pace of consumer spending into 2022," said Richard
Curtin, the survey's chief economist.
For the past three months, consumer sentiment has
remained at the lows first recorded in response to last
year's shutdown of the economy. Another factor which has
contributed to the more pessimistic views from American
consumers is that confidence in government economic
policies has significantly declined during the past six
months, Mr. Curtin said.
Consumers' assessment of the current economic conditions
fell, while Americans' expected inflation rate for the next
year increased to 4.8% compared with a 4.6% rise in
September. Although confidence fell significantly in the
last few months due to the spread of the Covid-19 Delta
variant, U.S. consumers haven't shown signs of pulling
back spending.
See:
http://www.sca.isr.umich.edu/
and
https://www.marketwatch.com/story/u-s-consumer-sentimentdecreased-in-early-october-university-of-michigan-271634307306
Manufacturing growth accelerated in September
Economic activity in the manufacturing sector grew at a
faster rate in September compared to August while
production continues to be limited by global pandemicrelated
issues according to the Institute for Supply
Management (ISM).
The overall economy expanded for the 16th consecutive
month, driving the ISM index to 61.1% in September. A
PMI reading above 50% indicates the manufacturing
economy is expanding.
Of the 18 manufacturing industries surveyed by ISM 17
reported growth in September, with Furniture & Related
Products reporting the strongest growth. The only industry
reporting a decrease in September compared to August is
Wood Products.
Timothy Fiore, chair of the ISM Manufacturing Business
Survey Committee, said ¡°companies and suppliers
continue to deal with an unprecedented number of hurdles
to meet increasing demand. Global pandemic-related
issues ¡ª worker absenteeism, short-term shutdowns due
to parts shortages, difficulties in filling open positions and
overseas supply chain problems ¡ª continue to limit
manufacturing growth potential.¡±
See:https://www.ismworld.org/supply-management-newsand-reports/reports/ism-report-on-business/pmi/september/
Construction materials prices dropped slightly in
September
Prices of construction components and materials were
down 0.2% in September according to the US Bureau of
Labor Statistics¡¯ producer price index (PPI) report. The
construction components and materials price index was
16.6 percent higher than it was a year ago.
Overall prices for processed goods for intermediate
demand rose by 1.3 percent in the month. The index was
23.9 percent higher than its year-ago level.
According to PPI numbers as compiled by Yield Pro
(PRO), the price of hardwood lumber has increased much
more than most construction material during the Covid
pandemic, rising 43.5% over the past 12 months and
45.3% since the first three months of 2020.
Among PRO¡¯s standard list of 20 construction materials
whose prices directly impact the cost of constructing an
apartment building, only softwood plywood products and
rolled steel bars saw a higher increase over pre-covid
prices. Comparatively, ready mix concrete prices rose by
5.0% and softwood lumber prices, while volatile, are
currently up 19.1% from their pre-covid level. According
to PPI, sawn hardwood prices in the US fell by 0.1% in
September.
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