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Report from
North America
US building permits fall sharply
New residential construction in the US saw a steep drop in
July, according to the latest US Department of Commerce
report.
The report said housing starts fell 6.8% to an annual rate
of 1.238 million after jumping 1.1% to a revised rate of
1.329 million in June. Single-family housing starts, which
account for the bulk of homebuilding, fell 14.1% to a
seasonally adjusted annual rate of 851,000 units last
month. Homebuilding has now declined for five straight
months.
The Commerce Department said building permits also
dropped 7% to an annual rate of 1.396 million in July after
rising 3.9% to a revised rate of 1.454 million in June.
Though mortgage rates have since retreated amid
optimism that the Federal Reserve will cut interest rates, a
jump in new housing inventory to levels last seen in early
2008 could limit any rebound in starts.
A National Association of Home Builders survey showed
homebuilder sentiment fell to an eight-month low in
August. Builders blamed "challenging housing
affordability conditions" for the fourth straight monthly
drop in confidence.
The news was much better in Canada as housing starts
climbed 16% in July compared with the previous month.
Groundbreaking increased on multiple unit and single-
family detached urban homes, data from the national
housing agency showed.
The seasonally adjusted annualized rate of housing starts
increased to 279,509 units from a revised 241,643 units in
June, the Canadian Mortgage and Housing Corporation
(CMHC) said. Economists had expected starts to rise to
245,000.
Existing-home sales increase for first time in five
months
US existing home sales rose more than expected in July,
reversing four consecutive monthly declines, as improving
supply and declining mortgage rates offered hope that
activity could rebound in the months ahead.
Home sales rose 1.3% last month to a seasonally adjusted
annual rate of 3.95 million units, the National Association
of Realtors (NAR) said. Economists polled by Reuters had
forecast home resales would edge up to a rate of 3.93
million units. But year-over-year, sales fell 2.5% (down
from 4.05 million in July 2023).
"Despite the modest gain, home sales are still sluggish,"
said Lawrence Yun, the NAR's chief economist. "But
consumers are definitely seeing more choices, and
affordability is improving due to lower interest rates."
Single-family home sales grew 1.4% to a seasonally
adjusted annual rate of 3.57 million in July, down 1.4%
from the previous year. Existing condominium and co-op
sales in July were identical to June at a seasonally adjusted
annual rate of 380,000 units.
Sales rose 1.1% in the US South, and they were
unchanged in the Midwest, which is considered the most
affordable region. Sales advanced 4.3% in the Northeast
and increased 1.4% in the West.
See: https://www.nar.realtor/research-and-statistics/housing-
statistics/existing-home-sales
Economy expanded in the second quarter
First half economic growth in the US was solid, with the
economy expanding at a robust 2.8% annualized rate in
the second quarter, according to figures released by the US
Department of Commerce, which are adjusted for inflation
and seasonal swings.
Gross domestic product (GDP), the broadest measure of
economic output, was much stronger in the second quarter
than economists predicted. The GDP report showed that
businesses are continuing to invest, and consumers are still
opening their wallets. That’s key, because consumer
spending is America’s economic engine, accounting for
about two-thirds of US economic output.
As the economy continued to expand from April through
June, inflation resumed a downward trend and seems to be
on track to slowing further toward the Federal Reserve’s
2% target.
America’s economy is set for a ‘soft landing’, which is
when inflation returns to the Fed’s target without a
recession, something that’s only happened once, during
the 1990s, according to some economists.
But even as the broader economy remains robust,
Americans are still downbeat. Inflation is an economy-
wide problem, so pessimism has been felt broadly.
Purchasing a home in many markets across the country
remains out of sight, with home prices at a record high and
mortgage rates still painfully elevated.
The booming job market in the aftermath of the Covid-19
pandemic has recently returned to normal and it’s
becoming a lot tougher to find a new job.
See: https://www.bea.gov/news/2024/gross-domestic-product-
second-quarter-2024-advance-estimate
US job gains revised downward
US hiring slowed substantially in July as employers added
a disappointing 114,000 jobs amid historically high
interest rates, persistent inflation and growing household
financial stress. Construction added 25,000 of those jobs
in July while manufacturing employment remained flat.
The unemployment rate rose from 4.1% to 4.3%, the
highest since October 2021, the Labor Department
reported. The rise, along with the pullback in payroll gains
and slowing wage growth, is stoking recession fears and
bolstering the Federal Reserve's case for cutting interest
rates, possibly sharply, in September.
Compounding the picture of a flagging job market,
employment gains for May and June were revised down
by a total of 29,000. And while a feeble jobs report could
always be a one-month blip, gains over the past three
months averaged 169,000, down from 218,000 the
previous three months.
US employment overall has stayed remarkably resilient,
largely because companies have been hesitant to lay off
workers after severe COVID-related labor shortages. But
that appears to be shifting. Jobless claims, a gauge of
layoffs, are still low by historical standards, but in August
rose to the highest level in more than a year.
There is also new data showing that the job growth over
the last year was not as strong as believed. The Bureau of
Labor Statistics (BLS) reported that the economy created
818,000 fewer jobs from April 2023 through March 2024,
representing the biggest revision to federal jobs data in 15
years.
The revisions could add to pressure on the Federal Reserve
to cut interest rates, because they indicate the labor market
wasn’t quite as strong as it looked during this period. The
BLS releases revisions to data all the time, but it’s unusual
for revisions to be this large. This set of revisions is
considered preliminary; the figure will be finalized in
February.
See: https://www.bls.gov/news.release/empsit.nr0.htm
Election impacting consumer sentiment
A surge in optimism by Democrats over the prospects of
Vice President Kamala Harris being elected President
lifted US consumer sentiment slightly this month. The
University of Michigan's consumer sentiment index edged
up to 67.8 from 66.4 in July. Americans' expectations for
the future rose, while their assessment of current economic
conditions sank slightly.
Joanne Hsu, the university's director of consumer surveys,
said she expects the index to bounce with changing poll
results as the November election nears. Consumers on
both sides of the political divide say their economic
outlook "depends on who's going to win the election,'' she
said.
The Michigan index has rebounded after bottoming out at
50 in June 2022 when inflation hit a four-decade high, but
it remains well below healthy levels.
http://www.sca.isr.umich.edu/
and
https://www.msn.com/en-us/money/markets/us-consumer-
sentiment-rises-slightly-on-democratic-optimism-over-
harris-presidential-prospects/ar-
AA1oVdeR?ocid=BingNewsVerp
US manufacturing continues to shrink
A key barometer for US manufacturing fell in July for the
fourth consecutive month and hit an eight-month low — a
sign that an ongoing slump has deepened.
The Institute for Supply Management’s manufacturing
index slid to 46.8% last month from 48.5% in June.
Numbers below 50% signal the manufacturing sector is
shrinking.
“US manufacturing activity entered deeper into
contraction,” said Timothy Fiore, chairman of the ISM
survey. “Demand remains subdued, as companies show an
unwillingness to invest in capital and inventory due to
current federal monetary policy and other conditions.”
One survey respondent, an executive from the wood
products industry, agreed that high interest rates are
hindering manufacturing. “Elevated financing costs have
dampened demand for residential investment,” they wrote.
“This has reduced our need for component products and
inventory.”
Five of the 18 manufacturing industries surveyed by ISM
reported growth in July, including the Furniture & Related
Products sector. The Wood Products sector was among 11
industries reporting contraction for the month.
See: https://www.msn.com/en-us/money/markets/slump-goes-on-
manufacturing-contracts-for-fourth-month-in-a-row-ism-finds/ar-
BB1r1Mn4?ocid=BingNewsVerp
Note: the doubling of the unit value for teak may be a statistical
error. Use with caution.
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