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Report from
North America
Housing starts advanced in July on single-family
construction
New US home construction rose in July on the back of
strength in single-family projects amid limited supply in
the resale market. Residential starts increased 3.9% last
month to a 1.45 million annualised rate according to US
Census Bureau data. Single-family homebuilding rose
6.7%.
Applications to build, a proxy for future construction,
ticked up 0.1% to an annualised pace of 1.44 million units.
Permits to build one-family homes rose to the highest in
more than a year.
“Despite the recent appetite for new homes, a potential
higher-for-longer Federal Reserve posture on interest
rates, tightening credit conditions and a slowing labour
market could signal residential investment will likely
continue to constrain economic growth according to Elisa
Winger, an economist for Bloomberg Economics.
Mortgage rates are back on the rise as it becomes clearer
the Federal Reserve is planning to keep interest rates
higher for longer to ensure inflation returns to its 2%
target. That contributed to the first decline in homebuilder
sentiment this year.
Multifamily construction fell 1.7%, to the lowest level
since September 2021. Applications for those projects also
declined. On a regional basis, starts in the West rose to the
highest level since April 2022. They also increased in the
Northeast and the Midwest, while the South saw a decline.
Canadian housing starts slipped by 10% in July compared
with the previous month, which had produced the
strongest figures in 10 years. The seasonally adjusted
annualised rate of housing starts fell to 254,966 units in
July from a revised 283,498 units in June, the Canadian
Mortgage and Housing Corporation (CMHC) said.
See:
https://www.census.gov/construction/nrc/current/index.html
and
https://finance.yahoo.com/news/us-housing-starts-advanced-july-125320286.html
Home sales wane as rate hikes bite
Existing home sales in the US market dropped month-on-
month in July by 2.2% and are more than 16% below
levels from this time last year as higher lending rates take
their toll the National Association of Realtors has reported.
Some 4.07 million single-family homes were sold last
month, down from 4.9 million over the same period last
year.
There were 1.1 million units on the market last month,
down 14.6% from a year ago. The interest rate on a 30-
year, fixed-rate mortgage averaged 7.09% mid August, up
nearly 2 percentage points from the same time last year.
Existing-home sales in the Northeast fell 5.9% from June
to an annual rate of 480,000 in July, down 248% from July
2022. In the Midwest, existing-home sales decreased by
3% from the prior month to an annual rate of 960,000 in
July, dropping 20% from the previous year.
Existing-home sales in the South retracted 2.6% from June
to an annual rate of 1.86 million in July, a decrease of
14.3% from one year ago. In the West, existing-home
sales increased 2.7% from the previous month to an annual
rate of 770,000 in July, down 12.5% from the prior year.
See:
https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
GDP beats expectations in second quarter
The US economy gained strength in the second quarter
despite punishing interest rate hikes and high inflation.
Gross domestic product, the broadest measure of
economic output, grew at an annualised, seasonally
adjusted 2.4% rate in the April-through-June period.
That was a faster pace than in the first three months of the
year and was also above economists’ expectations for a
1.8% rate, according to Refinitiv. GDP is also adjusted for
inflation.
Economic growth in the second quarter was driven by
business investment, government purchases, inventory
investment and consumer spending, though at a much
weaker pace than in the first quarter.
Consumer spending, which accounts for about two-thirds
of economic output, grew at just a 1.6% rate in the second
quarter, down sharply from a 4.2% rate in the first three
months of the year. That was driven by a sharp pullback in
spending on durable goods.
Nonresidential business investment rose sharply to a 7.7%
growth rate in the second quarter, up from a 0.6% rate in
the beginning of the year. That uptick was mostly thanks
to spending on equipment, which jumped to 10.8% from -
8.9%.
The slowdown in consumer spending reflects cooling
demand, which the Federal Reserve has been trying to
achieve through a series of aggressive rate increases. After
hiking its benchmark lending rate by a quarter point in late
July, the Fed will likely view the GDP report in a positive
light.
https://www.bea.gov/news/2023/gross-domestic-product-second-quarter-2023-advance-estimate
US job market continues to cool, but still adding jobs
The US job market has returned to pre-pandemic form.
Employers added 187,000 jobs in July, slightly above the
monthly average seen in the decade before the pandemic,
according to data released by the US Bureau of Labor
Statistics. Economists were expecting a net gain of
200,000 jobs last month. June’s job growth was revised
down to 185,000 jobs from 209,000.
July’s headline number and the downward revisions to the
monthly job total for May and June (down 25,000 jobs and
24,000 jobs, respectively), are further indications that the
nation’s labour market is gradually cooling off. Moreover,
it further fuels the notion that the Federal Reserve can
achieve a “soft landing” of reining in inflation without
massive layoffs.
The bulk of the job gains came in the health care and
social assistance fields. Employment in other fields such
as manufacturing and retail trade showed little change,
while construction saw a gain of 19,000 jobs.
See:
https://www.bls.gov/news.release/empsit.nr0.htm
US consumer sentiment tilts lower
US consumer sentiment dipped in August but Americans
expect inflation to edge lower over the next year and
beyond, a survey showed on Friday. The University of
Michigan's preliminary reading on the overall index of
consumer sentiment came in at 71.2 this month compared
to 71.6 in July. Economists polled by Reuters had forecast
a an even lower figure.
"Consumers perceived few material differences in the
economic environment from last month but they saw
substantial improvements relative to just three months
ago” said Joanne Hsu, the survey’s director.
See:
http://www.sca.isr.umich.edu/
and
https://www.msn.com/en-us/money/markets/us-consumer-sentiment-dips-in-august-inflation-expectations-improve/ar-AA1f9bAa
Manufacturing contracts for ninth month
Economic activity in the manufacturing sector contracted
in July for the ninth consecutive month according to the
nation's supply executives in the latest Manufacturing ISM
Report on Business. The ISM’s manufacturing PMI rose
slightly in July but remained at depressed levels indicating
little improvement in the industrial side of the economy.
Timothy R. Fiore, chair of the ISM Manufacturing
Business Survey Committee said "the US manufacturing
sector shrank again, but the uptick in the PMI indicates a
marginally slower rate of contraction and the July
composite index reading reflects companies face new
order softness”.
The Furniture and Related Products sector was one of only
two sectors reporting growth in July. The 16 other sectors
surveyed all reported contraction for the month. The
Furniture & Related products sector also led all sectors in
new order growth for the month.
See:https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/march/
and
https://www.msn.com/en-us/money/markets/us-manufacturers-remain-mired-in-a-slump-ism-finds/ar-AA1eDAT2
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