KEY DATA: Starts: +3.9%; 1-Family: -2.8%; Permits: +6%; 1-Family: +0.6%\/ Phila. Fed (NonMan.): -29.5 points; Expectations: -26.8 points<\/p>\n\n\n\n
IN A NUTSHELL: \u201cThe housing market\u2019s summer construction slump, if there really ever was one, may be over.\u201d<\/p>\n\n\n\n
WHAT IT MEANS: While housing prices have been soaring, home construction has been on a major roller coaster ride. Over the first eight months of the year, four times there were declines in housing starts and four months they were up. When you put it all together, so far this year, starts have soared by 21.5% compared to the same period in 2020. In August, they rebounded solidly from the large decline posted in July. The level is high, but largely sustainable. With permit requests continuing to run well above actual construction, we should see the building pace accelerate over the next few months. While starts this year have greatly exceeded last year\u2019s pace, permit requests jumped even more, 25.7%.<\/p>\n\n\n\n
The Philadelphia Federal Reserve\u2019s reading of nonmanufacturing activity in the mid-Atlantic region took a nosedive in early September. However, just about every component continued to show that activity is improving. It\u2019s just that the rate of growth slowed. One area where things did improve was hiring. More firms added both full-time and part-time workers. Price pressures remained extremely high, with input costs increasing faster. Firms continued to push through price increases to offset their rising expenses. Looking forward, confidence seems to be flagging, at least a little. The index fell sharply, but over fifty percent of the respondents continue to believe conditions will improve. However, there was a jump in the share that worry that the economy could slow over the next six months.<\/p>\n\n\n\n
IMPLICATIONS: Housing construction has been robust, it\u2019s just that it is doing that in fits and starts (pun intended). Given the demand for homes and the paucity of supply, look for the housing sector to add to growth in the third quarter. With retail sales also on the rise, it looks like third quarter growth will be quite strong. So, why are the markets in a tizzy? Sometimes what happens in China doesn\u2019t stay in China. Fears of a meltdown of Evergrande, a huge Chinese developer, brought out concerns that another financial crisis could be coming. One commentator even called it \u201cChina\u2019s Lehman Brothers moment\u201d. Yikes. But it isn\u2019t just China. As much as people complain about too much government spending, fears are that gridlock in Congress could cause there to be too little government spending. Let\u2019s not forget that government funds kept millions of small, medium and large businesses from failing and supported millions of unemployed workers and their families. That money is beginning to disappear, and the economy will have to stand on its own. Investors don\u2019t seem that confident the private-sector legs will not be wobbly. Then there is the periodic Congressional brain freeze over the debt limit, or more precisely raising it. I have a suggestion, just let the country default and see what then happens. No don\u2019t. This is just a dumb political game and as I and most other economists have argued for years, simply get rid of the debt limit. Heck, Congress created the mess by passing the spending bills, so pay for them. Finally, there is the not-so-surprising possibility that the investors may be simply taking stock of the fact that prices have soared. A pull back could be nothing more than normal rethinking of things after such as large increase. Ultimately, the economy will prevail and there is little reason to think growth will crater. Slowdown? Of course. Growth at recent levels is just not sustainable, when you consider that roughly two percent is trend growth. The markets need a psychological reset, where anything 2.5% or above is viewed as solid, strong, or even robust, which where it is right now.<\/p>\n","protected":false},"excerpt":{"rendered":"
KEY DATA: Starts: +3.9%; 1-Family: -2.8%; Permits: +6%; 1-Family: +0.6%\/ Phila. Fed (NonMan.): -29.5 points; Expectations: -26.8 points IN A NUTSHELL: \u201cThe housing market\u2019s summer construction slump, if there really ever was one, may be over.\u201d WHAT IT MEANS: While housing prices have been soaring, home construction has been on a major roller coaster ride. … Continue reading August Housing Starts and Permits and September Philadelphia Fed NonManufacturing Survey<\/span>