{"id":1661,"date":"2020-02-19T11:37:44","date_gmt":"2020-02-19T16:37:44","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1661"},"modified":"2020-02-19T11:37:44","modified_gmt":"2020-02-19T16:37:44","slug":"january-housing-starts-and-wholesale-prices","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1661","title":{"rendered":"January Housing Starts and Wholesale Prices"},"content":{"rendered":"\n

KEY DATA:<\/strong>  Starts: -3.6%; 1-Family: -5.9%; Permits: +9.2%;\n1-Family: +6.4%\/ PPI: +0.5%; Goods: +0.1%; Services: +0.7%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe strength in housing is a positive sign\nbut let\u2019s wait until the spring to see if it is real or weather-related.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  Housing had been improving at a nice, steady\npace for a number of years but it suddenly broke out at the end of last\nyear.  The January numbers seem to be\nsupporting that stronger performance as housing starts fell relatively\nmodestly.  There was a huge jump in\nDecember that was expected to be unwound by a sharp decline in January, but that\nwas not quite the case.  <\/em><\/strong>To put\nthings in perspective, construction activity was up by 21.6% over the January\n2019 rate despite the decline.  That shows\nhow out of control things are.  But there\nis an explanation: Warm weather.  Let\u2019s\nwait until the spring, when new home starts would normally jump, before getting\ntoo pumped up about a potential home construction boom.<\/em><\/strong>  As for the details, there was a sharp decline\nin the Midwest, a moderate drop in the South and modest increases in the\nNortheast and West.  Looking forward, permit requests\nwere up solidly across the entire nation. \n<\/em><\/strong>The level was the highest in nearly thirteen years.  Given the really warm weather in February, we could\nsee another pop in starts when we get the February data.<\/em><\/strong><\/p>\n\n\n\n

On the inflation front, producer prices jumped in\nJanuary, led by a surge in services costs.<\/em><\/strong>   These\ninclude trade services (wholesalers and retailers) as well as hotels and financial\nservices.  Energy and transportation prices\nwere down.  On the goods side, besides energy,\nthe pressures tended to be on the downside, with most components reporting\ndeclines.<\/em><\/strong>  Food costs were up\nmoderately.  Looking outward, the coronavirus\nis slowing world demand and commodity prices are falling as a consequence.  Thus, expect wholesale costs to be soft as\nlong as the epidemic persists.  <\/em><\/strong><\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  It\nlooks like housing will form a base for growth in the first quarter.  But if, as I suspect, most of that increase\nwas due to unseasonably warm weather, payback could be substantial in the\nspring.<\/em><\/strong>  I expect GDP to expand\nby somewhere between 1.5% and 1.75% this quarter even with a strong housing sector\nbut if it makes it back to 2%, then we are likely looking at a really weak\nsecond quarter.  Indeed, the\nimpacts from the coronavirus are likely to ramp up over the next few months as\nit will take time for China to ramp back up its manufacturing sector, when it\nactually can do that.  Supply chains have\nbeen disrupted and companies around the world are slowing production and sales\ndue to the lack of supplies.  Industrial\nproduction is likely to be pretty weak across the globe<\/em><\/strong> and while the\nequity market investors may not realize it, what happens everywhere else\nactually does affect what happens here.  We\ndon\u2019t know how long this will last but the longer this goes on, the broader and\ndeeper the effects.  The energy sector is retrenching\nand the last time that happened investment cratered and U.S. growth decelerated\nsharply.<\/em><\/strong>  We are not facing the\nsame price collapse, but business investment has been weak and cut\nbacks in the energy sector cannot help. \nThus, the first half of this year is setting up to be soft and if the\nepidemic lasts through the spring, don\u2019t be surprised if there is a flat or\neven negative second quarter.<\/em><\/strong>    <\/em><\/strong>   <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  Starts: -3.6%; 1-Family: -5.9%; Permits: +9.2%; 1-Family: +6.4%\/ PPI: +0.5%; Goods: +0.1%; Services: +0.7% IN A NUTSHELL:  \u201cThe strength in housing is a positive sign but let\u2019s wait until the spring to see if it is real or weather-related.\u201d WHAT IT MEANS:  Housing had been improving at a nice, steady pace for a … Continue reading January Housing Starts and Wholesale Prices<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1661","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1661","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1661"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1661\/revisions"}],"predecessor-version":[{"id":1662,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1661\/revisions\/1662"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}