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Report from
North America
Housing starts near 18-month low
Homebuilding fell to the lowest level in nearly 1-1/2 years
in July, weighed down by higher mortgage rates and prices
for construction materials, suggesting the housing market
could contract further in the third quarter.
Housing starts plunged 9.6% to a seasonally adjusted
annual rate of 1.446 million units last month, the lowest
level since February 2021. Single-family housing starts,
which account for the biggest share of homebuilding,
dropped 10.1% to a rate of 916,000 units, the lowest level
since June 2020. Single-family homebuilding decreased in
the Midwest and the South but rose in the West and
Northeast.
The National Association of Home Builders/Wells Fargo
Housing Market sentiment index fell for an eighth straight
month in August, dropping below the break-even level of
50 for the first time since May 2020. Rising construction
costs and mortgage rates were largely blamed.
Canadian housing starts surprisingly rose in July compared
with the previous month. The seasonally adjusted
annualized rate of housing starts rose 1.1% to 275,329
units from a revised 272,381 units in June, according to
the Canadian Mortgage and Housing Corporation
(CMHC). Analysts had forecasts starts would dip to
262,100.
See:
https://www.census.gov/construction/nrc/index.html
and
https://www.cmhc-schl.gc.ca/en/professionals/housing-marketsdata-and-research/housing-data/data-tables/housing-marketdata/monthly-housing-starts-construction-data-tables
Existing home sales continue to fall
Existing-home sales sagged for the sixth straight month in
July, according to the National Association of Realtors.
All four major U.S. regions recorded month-over-month
and year-over-year sales declines.
Total existing-home sales slipped 5.9% from June to a
seasonally adjusted annual rate of 4.81 million in July.
Year-over-year, sales fell 20.2% (6.03 million in July
2021).
"The ongoing sales decline reflects the impact of the
mortgage rate peak of 6% in early June," said NAR Chief
Economist Lawrence Yun. "Home sales may soon
stabilize since mortgage rates have fallen to near 5%,
thereby giving an additional boost of purchasing power to
home buyers."
Existing-home sales in the Northeast slid to an annual rate
of 620,000 in July, down 7.5% from June and 16.2% from
July 2021. Existing-home sales in the Midwest declined
3.3% from the prior month to an annual rate of 1,190,000
in July, dropping 14.4% from July 2021. Existing-home
sales in the South waned 5.3% in July to an annual rate of
2,130,000, down 19.6% from one year ago.
Existing-home sales in the West retracted 9.4% compared
to last month to an annual rate of 870,000 in July, down
30.4% from this time last year.
Builders are calling the current situation a ¡°housing
recession,¡± and new construction of homes has started to
fall. Builders expressed gloominess in an August survey,
signaling that construction will continue to slow.
See:
https://www.nar.realtor/newsroom/existing-home-salesretreated-5-9-in-july
GDP and jobs market tell contradicting stories of U.S.
economy
The U.S. economy is showing pockets of strength while
many other indicators have some economists warning of a
lurking recession.
Gross domestic product fell at a 0.9% annualized rate last
quarter, the government said in its advance estimate of
GDP. The unexpected contracted in the second quarter,
with consumer spending growing at its slowest pace in two
years and business spending declining, raises the risk that
the economy was on the cusp of a recession.
While the second straight quarterly decline in GDP largely
reflected a more moderate pace of inventory accumulation
by businesses due to ongoing shortages of motor vehicles,
the economic profile was weak, with exports as the only
bright spot.
"There is without doubt an underlying slowdown in
domestic demand in evidence here," said Brian Coulton,
chief economist at Fitch Ratings in New York. "But this
number does not signal the early arrival of the inflation
and Fed-tightening induced recession that markets have
recently been focused on."
The bright spot in the economy in the second quarter was
employment. Job growth averaged 456,700 per month in
the first half of the year, while domestic demand continued
to grow. The July jobs report was even better as U.S.
employers added a booming 528,000 jobs. With the gain,
the labor market now has recovered all 22 million jobs lost
in the COVID-19 pandemic and continued to defy soaring
inflation, rising interest rates, and a slowing economy.
The unemployment rate fell from 3.6% to 3.5%, matching
a 50-year low reached just before the pandemic began in
early 2020, according to the Labor Department.
"The economy is not falling into recession," says Brian
Bethune, an economist at Boston College. "It is actually
picking up speed as demand for services accelerates in a
post COVID-19 environment."
See:https://www.usatoday.com/story/money/2022/08/05/julyjobs-report-unemployment-rate-3-5-528-000-jobsadded/10243309002/
Consumer Sentiment Rises to Three-Month High,
Topping Forecasts
Consumer sentiment rose in early August to a three-month
high on firmer expectations about the economy and
personal finances. The University of Michigan¡¯s
preliminary sentiment index rose to 55.1 from 51.5 in July.
Inflation expectations were mixed, with consumers
boosting their longer-term views for prices slightly, while
reducing their year-ahead outlook for costs.
¡°In spite of this strength in the labor market and some
signs of improvement in inflation, consumer sentiment
remains very low by historical standards,¡± Joanne Hsu,
director of the survey, said in a statement. ¡°In the current
context, even strong labor markets have been raised as
negative news for business conditions, as consumers
recognize the challenges businesses may face with hiring.¡±
See:
http://www.sca.isr.umich.edu/
Fewer manufacturers seeing growth, wood products
and furniture sectors continue to lag
Economic activity in the manufacturing sector grew in
July, with the overall economy achieving a 26th
consecutive month of growth, say the nation's supply
executives in the latest Manufacturing ISM Report on
Business. The growth, however, was at the weakest rate
since June 2020 as new order rates continue to shrink.
For the third consecutive month, the wood and furniture
sectors reported contraction while 11 of the ISM¡¯s 18
sectors reported growth. Of the seven industries reporting
contraction in July, the Wood Products and the Furniture
& Related Products sectors reported the largest contraction
as well as the largest decline in new orders.
See:https://www.ismworld.org/supply-management-news-andreports/reports/ism-report-on-business/pmi/july/
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