Residential construction picked up last month, according to the US Census Bureau. Housing starts beat expectations and increased to an annualized rate of 1.072 million units on a seasonally adjusted basis—the most since last November. More permits were issued last month as well: 1.080 million (annualized) in May, the highest number since the recession ended in mid-2009. The monthly gain delivered a dramatic boost to the year-over-year in comparison for starts, which increased more than 26% last month vs. a year earlier. That’s the strongest annual rate since last November. Permits, however, slumped a bit in the annual comparison, decelerating to a slim 3.9% advance.
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Housing starts are expected to total 946,000 in tomorrow’s update for April, based on The Capital Spectator’s median econometric forecast (seasonally adjusted annual rate). The projection represents no change vs. the previously reported 946,000 for March.
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Today’s reports on jobless claims and industrial production offer a mixed review for the macro outlook. On the one hand, the sharp decline in new filings for unemployment benefits to a seven-year low is a powerful signal for expecting continued growth in the labor market for the near term. But the surprisingly big slump in industrial output last month throws a bit of cold water on any celebration over the lesser pace of new layoffs. Even so, it’s premature to read too much into the monthly dive in industrial production since the year-over-year trend is still advancing at a decent pace.
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Economic growth slowed to a crawl in the first three months of this year, but a rebound is projected for the second quarter, according to The Capital Spectator’s median econometric nowcast. GDP is expected to rise 2.8% during the April-through-June period (real seasonally adjusted annual rate). This is an initial estimate that uses limited Q2 data and so the projection is a preliminary review that will be updated several times in the weeks ahead as new economic indicators are published and existing data are revised. The final nowcast for the quarter will be published shortly ahead of the official Q2:2014 GDP report. The US Bureau of Economic Analysis (BEA) is scheduled to release its “advance” Q2 estimate on July 30, 2014.
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US industrial production in April is projected to increase by 0.3% vs. the previous month in tomorrow’s release from the Federal Reserve, according to The Capital Spectator’s median econometric forecast. The projected gain represents a deceleration in growth from the previously reported 0.7% rise for March.
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Retail sales slowed to a crawl in April vs. the previous month, rising a slim 0.1%, the US Census Bureau reports. Excluding gasoline, retail spending was flat. The news contrasts sharply with the March data, which revealed a dramatic 1% jump in spending. For the moment, however, it’s reasonable to dismiss the latest update as noise. The year-over-year change through last month (+4.0%) was off only marginally from annual pace in March (4.1%), suggesting that retail activity is still rolling forward at a robust rate.
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This month’s outlook for long-run risk premiums (return over the “risk-free” rate) is generally unchanged from the previous estimates. For example, the Global Market Index (GMI)–an unmanaged, market-value weighted mix of all the major asset classes—is currently expected to generate an annualized 4.1% risk premium, based on analysis of data through April 2014. The projection matches last month’s forecast.
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US retail sales are expected to rise 0.2% in tomorrow’s April report vs. the previous month, according to The Capital Spectator’s median econometric forecast. The prediction represents a substantially slower rate of growth over the previously reported 1.1% gain for March.
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● Stress Test: Reflections on Financial Crises
By Timothy F. Geithner
Blog post via Dealbook/NY Times
Timothy F. Geithner is finally going public. Since Mr. Geithner stepped down as Treasury secretary last year, he has remained largely out of the public eye. Now, with the publication of his book, “Stress Test: Reflections on Financial Crises,” to be published next week, Mr. Geithner is breaking his silence. I caught up with him last month as he was putting the finishing touches on the book. We discussed — and debated — his tenure in government and his prescriptions for solving financial crises. During a series of interviews, he was surprisingly frank. The result of those interviews — and an early look at his book — appear as the cover story in the coming issue of The New York Times Magazine.
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Housing is the weak link in an otherwise upbeat trend for the US economy. Deciding if this is a temporary soft patch for real estate or the start of something darker is still a work in progress. The potential for trouble is certainly lurking, as the recent run of weak data in residential sales and construction show. Given the influential link between housing and economic activity generally, watching this sector closely is critical these days. The truth will out eventually, but a clearer picture based on the hard data for several key metrics will take months. It doesn’t help that several reports are published with a significant lag. For example, we won’t see numbers on April’s housing starts until May 16. Fortunately, there are more timely numbers to watch to supplement the analysis—numbers that may drop relatively early clues on where housing’s headed. For example, here are three data sets that deserve close attention for tracking conditions in the housing market on a real-time or quasi-real-time basis.
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