by Calculated Risk on 7/17/2015 02:48:00 PM

Total housing starts in June were above expectations, and, including the upward revisions to April and May, starts were strong.

There was also a significant increase for permits again in June (mostly for the volatile multi-family sector).

Earlier: Housing Starts increased to 1.174 Million Annual Rate in June

This first graph shows the month to month comparison between 2014 (blue) and 2015 (red).

Click on graph for larger image.

Even with weak housing starts in February and March, total starts are still running 10.9% ahead of 2014 through June.

Single family starts are running 9.1% ahead of 2014 through June.

Starts for 5+ units are up 14.9% for the first six months compared to last year.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).

The blue line (multi-family starts) was moving more sideways, but jumped up in June.

Multi-family completions are increasing.

Even with the surge in permits this over the last two months - and strong multi-family starts in June - I think most of the growth in multi-family starts is probably behind us - although I expect solid multi-family starts for a few more years (based on demographics).

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

A strong report.

by Calculated Risk on 7/17/2015 11:39:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.6% annualized rate) in June. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.6% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.9% annualized rate) in June. The CPI less food and energy rose 0.2% (2.2% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for June here. Motor fuel was up sharply again in June.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 1.7%, and the CPI less food and energy rose 1.8%. Core PCE is for May and increased 1.2% year-over-year.

On a monthly basis, median CPI was at 3.6% annualized, trimmed-mean CPI was at 2.6% annualized, and core CPI was at 2.2% annualized.

On a year-over-year basis these measures suggest inflation remains below the Fed's target of 2% (median CPI is above 2%).

Inflation is still low, and a key question is: Will inflation move up towards 2%?

by Calculated Risk on 7/17/2015 10:08:00 AM

The preliminary University of Michigan consumer sentiment index for July was at 93.3, down from 96.1 in June.

This was below the consensus forecast of 96.2.


Click on graph for larger image.

by Calculated Risk on 7/17/2015 08:39:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,174,000. This is 9.8 percent above the revised May estimate of 1,069,000 and is 26.6 percent above the June 2014 rate of 927,000.

Single-family housing starts in June were at a rate of 685,000; this is 0.9 percent below the revised May figure of 691,000. The June rate for units in buildings with five units or more was 476,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,343,000. This is 7.4 percent above the revised May rate of 1,250,000 and is 30.0 percent above the June 2014 estimate of 1,033,000.

Single-family authorizations in June were at a rate of 687,000; this is 0.9 percent above the revised May figure of 681,000. Authorizations of units in buildings with five units or more were at a rate of 621,000 in June.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) increased in June.  Multi-family starts are up sharply year-over-year.

Single-family starts (blue)  decreased in June (because May was revised up) and are up about 14.7% year-over-year.

The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low),

This was above expectations of 1.125 million starts in June.  And, with the upward revisions to prior months, and another surge in permits, this was another solid report. I'll have more later ...

by Calculated Risk on 7/16/2015 07:52:00 PM

Excerpts from a research piece by Goldman Sachs economist Zach Pandl on GDP:

Although most of the inputs used to calculate GDP are seasonally adjusted, the topline growth numbers still appear to fluctuate with seasonal patterns. The BEA intends to address this “residual seasonality” as part of its annual GDP revisions later this month. While the new estimates will be an improvement, they look unlikely to remove residual seasonality altogether.

According to our estimates, reported GDP growth tends to run about 1pp below other measures of real activity (like GDI or our CAI) in Q1 of each year. These estimates are statistically significant across a variety of samples. The BEA has said it will revise several components of GDP, rather than address residual seasonality at the aggregate level. We estimate that the likely revisions will affect Q3 and Q4 the most, with only modest effects on Q1 of about 0.3pp. Thus, our preliminary estimates suggest that Q1 GDP figures will remain about 0.7pp too low.

Residual seasonality is just one reason we track other measures of growth in conjunction with GDP. The BEA also seems to see the value in this approach, and with the revision will begin publishing other aggregate measures to “facilitate the analysis of macroeconomics trends”.

Friday:
• At 8:30 AM ET, the Consumer Price Index for June from the BLS. The consensus is for a 0.3% increase in prices, and a 0.2% increase in core CPI.

• Also at 8:30 AM, Housing Starts for June. Total housing starts decreased to 1.036 million (SAAR) in May. Single family starts decreased to 680 thousand SAAR in May. The consensus is for total housing starts to increase to 1.125 million (SAAR) in June.

• At 10:00 AM, the University of Michigan's Consumer sentiment index (preliminary for July). The consensus is for a reading of 96.2, up from 96.1 in June.