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US: Housing data bettered expectations but uneven growth risks prevail – ING

FXStreet (Delhi) – Rob Carnell, Chief International Economist at ING, suggests that the US housing starts September figures comprehensively beat expectations with a 1.206 (million annual rate) pace, with upward revisions to the previous months’ data.

Key Quotes

“But they are in line with the strong builder sentiment surveys recently released, so it is hard not to conclude that the interest rate sensitive construction sector remains in buoyant mood – not something we can say of the exchange rate sensitive manufacturing sector.”

“One point of concern in the housing release was permits, which are lower at 1.103m from 1.161m, and their lowest since March. This looks like a normalisation from the multifamily sector after recent strength, whist single family home permits were only fractionally lower.”

“We may see the housing start numbers moderate in the coming months as a result, though this likely reflects the noise in this series, and we don’t see any signs of this market slowing on a trend basis.”

“That said, we doubt the Fed will pay much attention to this, and like the buoyant autos sector, this data likely carries less weight in their deliberations than core sales, and anything labour related.”

“In terms of housing, what may be more important in coming months for the Fed is the degree to which strong housing rental increases feed through into higher core inflation figures, and whether they will be able to hold up in the face of slower house price growth. We think they will be worth watching.”

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