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US: Mixed housing starts and permits data in October - Nomura

FXStreet (Delhi) – Research Team at Nomura, suggests that yesterday’s release of the housing starts and permits data for October painted a rather mixed picture of the economy.

Key Quotes

“US housing starts declined by 11% in October to an annualized 1.060mn, well below expectations (Nomura: 1.164mn, Consensus: 1.160mn) from a revised 1.191mn in the prior month (previously reported as 1.206mn).”

“The falloff in starts in October suggests that residential investment may contribute less to growth in Q4 than previously assumed. That said, the details of the report show that the weakness in starts were not broad-based and likely not indicative of a renewed slowdown in construction activity.”

“Building permits for October matched our forecast of 1150k, a 4.1% improvement from the prior month. The permits data provided a positive sign for the underlying trend in housing demand as single-family permits increased by 2.4% to 711k, the highest level since the recovery.”

“On balance, despite the downside surprise to the starts data, the gains in permits suggest that housing demand continues to improve. In addition, given that the weakness in starts was primarily concentrated in the multifamily sector and constrained to some regions, we do not think the weakness in today’s report is indicative of a broad-based weakness in the housing sector. There is plenty of room for improvement in housing, but we expect the recovery to continue to be gradual and choppy.”

“GDP Tracking Update: After incorporating the weaker-than-expected housing starts data for October, we have revised our Q4 GDP tracking estimate down to 1.6% from 1.7%, previously.”

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