Last Week’s Economic News in Review
Housing starts showed encouraging performance, while consumer prices were flat, and lay-offs remained low.
August 24th, 2016
New housing construction had a solid story to tell last week, with starts on housing construction in July rising to more than any point since the beginning of 2008.
Starts on housing construction in July hit an annual rate of 1.21 million, which was 2.1 percent over June’s revised rate of 1.18, and was 5.6 percent higher than July 2015’s pace of 1.14 million, the Census Bureau reported last week. While starts on single-family homes rose 0.5 percent to a rate of 770,000 in July, starts on units in buildings with five units or more rebounded a whopping 8.3 percent to an annual rate of 433,000.
While construction starts were up, permits were down. Permits issued in July for the construction of private housing dipped slightly to an annual rate of 1.152 million, which was 0.1 percent below June’s revised June rate of 1.153 million. Permits issued of single-family homes dropped 3.7 percent to an annual rate of 711,000.
Regardless of permit activity, the sizable leap for housing starts gave many housing market watchers some optimism.
“What we’re seeing is quite encouraging,” Millan Mulraine, deputy head of U.S. research and strategy for TD Securities, told Bloomberg. “It suggests that the housing sector recovery is building on the strong momentum we’ve had in the past few months.”
Consumer prices for last month were flat, with the Consumer Price Index for All Urban Consumers unchanged in July, the Bureau of Labor Statistics reported last week.
The energy index declined 1.6 percent in July and the food index was unchanged for the month, while the index for all items less food and energy rose, but only barely, posting its smallest increase since March. As a result, the all items index was unchanged after four straight months of gains. The index for all items less food and energy — typically considered core inflation — grew just 0.1 percent in July.
The lack of movement in consumer prices made many economists conclude that the Fed will be taking a pass on increasing interest rates for the near future.
“Inflation is very likely to remain tame at best,” Ameriprise Financial Inc. Senior Economist Russell Price told Bloomberg. “Other than housing and medical care, vast sectors of the economy are still seeing negative price pressures. It softens the outlook for a Fed hike.”
Initial Jobless Claims
First-time claims for unemployment benefits filed by the recently unemployed during the week ending August 13, dropped to 262,000, a decline of 4,000 from the preceding week’s total of 266,000, according to last week’s report from the Employment and Training Administration.
The four-week moving average — considered a more stable measure of lay-offs — notched up to 265,250, a gain of 2,500 claims from the prior week’s average of 262,750. Once again, the total was in historically low territory not seen since the 1970s, marking the 76th straight week of initial claims coming in below 300,000.
This week we can expect:
- Tuesday — New home sales for July from the Census Bureau.
- Wednesday — Existing home sales for July from the National Association of Realtors.
- Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for July from the Census Bureau.
- Friday — Gross domestic product for the second quarter, second estimate, from the Bureau of Economic Analysis; and August consumer sentiment from the University of Michigan Survey of Consumers.