Economy Watch: Housing and Other Metrics Point Positive for US Economy
- Aug 19, 2015
One reasonably good monthly report is just that, only one report, but when a number of reports describing various economic metrics start coming in rapid succession, a pattern might be developing. In the case of late summer 2015, it’s a pattern that points to economic strength. In the current climate, that might be enough to tip the balance toward a September rise in interest rates. The latest fairly strong metric is housing starts for July, which the Census Bureau reported on Tuesday. Specifically, starts came in at their highest level in about eight years.
Privately owned housing starts in July were at an annualized rate of 1.206 million. That’s a bit above June—0.2 percent—and considerably above the July 2014 rate of 1.095 million—10.1 percent. Single-family starts drove the monthly and annual upticks, rising by 12.8 percent for the month, and 19 percent for the year. The more volatile multifamily starts in July happened to be down for the month and the year, 17.1 percent and 2.1 percent, respectively, but they tend to yo-yo around.
Home builders recently demonstrated their continuing optimism about the market. According to the National Association of Home Builders, builder confidence in the market for newly built, single-family homes in August rose one point to a level of 61 on the NAHB/Wells Fargo Housing Market Index. Anything more than 50 is optimistic, and the members of the NAHB have been optimistic for quite a while. The August reading tops things off: it’s the highest one since November 2005, and this time around the feeling isn’t inspired by bubble-inspire volumes of construction.
Housing construction’s an important driver of economic growth, since it involves the employment of a large amount of labor, and a purchase of a significant amount of materials. So strength in housing is strength for the economy. Other metrics that have come in more-or-less strong recently include a good month for payroll employment, with the U.S. economy creating a net of 215,000 jobs in July; retail sales, which were up 0.6 percent for the month; and industrial output, which gained 0.6 percent in July, with manufacturing up 0.8 percent. Thus a number of important metrics are all pointing positive as the summer ends. And the cherry on top: gas prices. Except for the Midwest, where a refinery glitch upped prices this week, the rest of the nation is enjoying a decline in gas prices.