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Report from
North America
US housing starts rise unexpectedly
Construction of new homes rose 1.9% in October, as
builders amped up new projects. The pace of construction
increased as builders saw a pressing need for more
housing units, with the resale market continuing to deal
with a shortage.
Housing starts rose to a 1.37 million annual pace from
1.35 million in October. That’s how many houses would
be built over an entire year if construction took place at the
same pace every month as it did in October. The
government data exceeded expectations on Wall Street,
where the expected rate was 1.35 million.
“Broadly, while the demand for homes has weakened in
line over the past year to 18 months with the ascent of
mortgage rates and home prices, builders are generally
looking beyond the near-term and are well aware that there
is a structural shortage of housing in the US,” Stephen
Stanley, chief US economist at Santander US Capital
Markets, wrote in a note.
With rates falling, buyer demand is likely to bounce back.
And given that builders are among the few who are adding
new housing stock, they may ramp up starts in the months
to come, barring any major weather events. Home builders
ramped up construction of single-family homes in the
Midwest and West, with starts rising by 12% in each of
those regions. Housing starts fell the most in the
Northeast, by 14.5%.
The pace of housing starts for October also ticked up in
Canada. The Canadian Mortgage and Housing Corporation
reported that the seasonally adjusted annual rate of
housing starts in October came in at 274,681, up 1% from
270,669 in September. The increase came as the pace of
urban housing starts rose two per cent to 257,357 units,
with multi-unit urban starts up 1% at 209,887 and single-
detached urban starts up 9% at 47,470.
See:
https://www.census.gov/construction/nrc/current/index.html
and
https://www.msn.com/en-ca/money/topstories/cmhc-says-annual-pace-of-housing-starts-in-october-up-1-from-september/ar-AA1k28Zg
US builder confidence low, but improvements are in
sight
High mortgage rates in the US that approached 8% earlier
in November continue to hammer builder confidence, but
recent economic data suggest housing conditions may
improve in the coming months.
Builder confidence in the market for newly built single-
family homes in November fell six points to 34 in
November, according to the National Association of Home
Builders (NAHB)/Wells Fargo Housing Market Index
(HMI). This is the fourth consecutive monthly drop in
builder confidence, as sentiment levels have declined 22
points since July and are at their lowest level since
December 2022.
Despite this, NAHB is forecasting approximately a 5%
increase for single-family starts in 2024 as financial
conditions ease with improving inflation data in the
months ahead.
“While builder sentiment was down again in November,
recent macroeconomic data point to improving conditions
for home construction in the coming months,” said NAHB
Chief Economist Robert Dietz.
See:
https://www.globalwood.org/news/2023/news_20231117.htm
US home sales continue to fall, hit 13-year low
US Home sales fell in October to a fresh 13-year low as
high interest rates and home prices continued to pummel
the housing market.
Existing home sales, which make up most of the housing
market, decreased 4.1% in October from the prior month
to a seasonally adjusted annual rate of 3.79 million, the
lowest rate since August 2010, the National Association of
Realtors (NAR) said. October sales fell 14.6% from a year
earlier. Sales have been near 2010 levels in recent months.
Even as home-buying demand has slumped, the inventory
of homes for sale has stayed low. High rates are making
homeowners unwilling to sell and move, because they
don’t want to give up their existing low interest rates. The
limited supply is a major reason that home prices are
rising in much of the U.S.
“Lack of inventory along with higher mortgage rates are
really hindering home sales,” said Lawrence Yun, NAR’s
chief economist.
Existing-home sales in the Northeast dipped 4.0% from
September to an annual rate of 480,000 in October, down
15.8% from October 2022. At an annual rate of 930,000 in
October, existing-home sales in the Midwest were
unchanged from the prior month but down 13.9% from
one year ago. Existing-home sales in the South retracted
7.1% from September to an annual rate of 1.69 million in
October, a decline of 14.6% from the previous year. In the
West, existing-home sales decreased 1.4% from the prior
month to an annual rate of 690,000 in October, down
14.8% from one year ago.
See:
https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
October's jobs report shows the labour market is
cooling
The US economy added an estimated 150,000 jobs in
October, and the unemployment rate changed little at
3.9%, the US Bureau of Labor Statistics reported. Job
gains occurred in health care, government, and social
assistance. Employment declined in manufacturing due to
strike activity.
The October jobs report showed a lower-than-expected
monthly total, a higher unemployment rate, a slower pace
of job gains and cooler wage growth, which is exactly
what the central bank is looking for.
The report suggests that the job market has finally started
to cool down, said Seema Shah, chief global strategist at
Principal Asset Management. The strong September total
was but "a momentary upward blip in the jobs numbers,"
she said, and the labor market is now back on track,
continuing its previous downward trend.
In October, construction employment continued to trend
up (+23,000 persons), about in line with the average
monthly gain of 18,000 over the prior 12 months.
Employment in manufacturing decreased by 35,000 in
October, reflecting a decline of 33,000 in motor vehicles
and parts that was largely due to strike activity. The
United Auto Workers has struck tentative deals with Ford,
General Motors and Chrysler-parent Stellantis after a six-
week campaign of workers walking off the job.
See:
https://www.bls.gov/news.release/empsit.nr0.htm
US GDP up 4.9% in third quarter
The gross domestic product (GDP) of the US expanded at
an annualized rate of 4.9% in the third quarter, the US
Bureau of Economic Analysis' (BEA) first estimate
showed. The US economy grew at the fastest pace in
nearly two years, buoyed by a strong consumer in spite of
higher interest rates, ongoing inflation pressures, and a
variety of other domestic and global headwinds. The US
GDP reading followed the 2.1% growth recorded in the
second quarter and surpassed Wall Street expectations of
4.2%.
“The increase in real GDP reflected increases in consumer
spending, private inventory investment, exports, state and
local government spending, federal government spending,
and residential fixed investment that were partly offset by
a decrease in nonresidential fixed investment. Imports,
which are a subtraction in the calculation of GDP,
increased," the BEA explained in its press release.
Consumer spending in the US, as measured by personal
consumption expenditures, increased 4% for the quarter
after rising just 0.8% in the second quarter. The gross
private domestic investment surged 8.4% and government
spending and investment jumped 4.6%.
The data reflects the lift from a strong US labor market.
Traders added to bets the Federal Reserve will keep policy
on hold through this year and will begin interest rate cuts
in mid-2024, despite the US economy growing at its
fastest pace since late-2021.
See:https://www.bea.gov/news/2023/gross-domestic-product-third-quarter-2023-advance-estimate
US consumer sentiment sags to 6-month low
Consumer sentiment in the US fell in November for the
fourth month in a row due to worries about higher interest
rates as well as war in the Middle East. The preliminary
reading of the sentiment survey declined to 60.4 from 63.8
in October, the University of Michigan said. It’s the
weakest reading since May.
“The consumer is feeling stretched between the twin pains
of inflation and higher interest rates, making them less
optimistic about their current and future economic
prospects,” said Damian McIntyre, head of Multi Asset
Solutions at Federated Hermes.
See:
http://www.sca.isr.umich.edu/
and
https://www.msn.com/en-us/money/markets/consumer-sentiment-falls-to-6-month-low-on-worries-over-higher-interest-rates-and-mideast-war/ar-AA1jIrE4
US manufacturing disappoints in October
The US manufacturing sector contracted at a faster pace
last month as the October ISM Manufacturing PMI fell to
46.7, trailing the 49.0 consensus and decelerating from
49.0 in September. Any number below 50 reflects
shrinking activity. October signaled the 12th consecutive
month of contraction following a 28-month period of
growth.
Of the 18 industries surveyed by ISM, 13 industries
reported contraction in October including the Wood
Products sector and the Furniture and Related Products
sector.
The decline in new orders was a main concern, said
Timothy Fiore, chair of the ISM’s factory survey
committee. The backlog of orders is also extremely weak.
“New orders are not there. That’s a concern,” Fiore said.
Manufacturing had reached a floor of 46 in June and was
starting to rebound, but higher interest rates caused firms
to pull back capital spending plans, economists said.
In addition, the United Auto Workers strike might have
had some impact on the data.
See:https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/october/
U.S. hardwood lumber exports fall sharply in 2023
Fastmarkets.com has reported US foreign trade of
hardwood lumber declined sharply in 2023. Exporters
have struggled to compete on price against alternative
species in most offshore markets this year. Meanwhile,
fading demand in the US has impeded imports, traders say.
US hardwood lumber exports to offshore destinations fell
to 1.56 million cubic metres through August, down 21%
from the first eight months of 2022. At the current pace,
exports will decline to the lowest volume since 2011,
according to statistics from the US Foreign Agricultural
Service.
Exports to China, by far the largest overseas market for
US hardwoods, slipped to 696,063 cubic metres through
August, trailing the year-ago eight-month volume by 10%.
Shipments to China are on pace to decline for a third
consecutive year after peaking in 2020 at 1.25 million
cubic metres.
Sales to other Pacific Rim destinations fell at a steeper rate
compared to the decline in China. Shipments to Vietnam
decreased 23% to 224,743 cubic metres. Exports to
smaller markets in the region such as Indonesia, Thailand,
South Korea, and Malaysia plunged between 44% and
54%.
See:
https://www.globalwood.org/news/2023/news_20231121.htm
and
https://www.fastmarkets.com/insights/us-struggles-with-foreign-trade-of-hardwood-lumber-in-2023/#:~:text=Hardwood%20lumber%20exports%20to%20offshore,the%20US%20Foreign%20Agricultural%20Service.
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