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US: Lower claims and higher housing starts

Fri, Jul 18 2008, 07:43 GMT
by KBC Market Research Desk

KBC Bank

due to national holiday there will be no reports on monday july 21

Initial claims rose by a smaller than expected 18 000 to 366 000, following a plunge in the previous week (-56 000). Also continuing claims, that are reported with a oneweek lag, were a bit better than expected, dropping 81 000 to 3 122 000, from a cycle high in the previous week. While the data for the last two weeks are positive and apparently point to a turn for the better in the labour market, we would be cautious by drawing already conclusions. Special factors like the extension of the claims benefits or the timing of the yearly plant shutdowns may be at work.

Housing starts rose unexpectedly by 9.1% to an annual 1.066 million units, the highest pace since February and defying expectations for a small decline. However, the surprise was narrowly concentrated in the Northeast, where starts jumped 102.6%. This seems to be due to a new construction code in New York. Excluding these, starts effectively dropped 4% M/M, suggesting that the underlying conditions in the housing sector haven’t improved. . Single-family home starts, the most important sector, dropped 5.3% M/M to the lowest level since January 1991, while the volatile multiply family units rose 42.5% M/M. A similar picture was visible in the housing permits that soared by 11.6% M/M to 1.091 million units from 978 000 previously. The Northeast contributed for the bulk of the increase, other regions were little changed. Also here, single-family home permits dropped and multifamily surged higher.

The Philly Fed survey on manufacturing showed that conditions remained very weak in July. The headline, general business activity, index was marginally higher, but still at -16.3 versus -17.1 in June. The outcome was near expectations. Also the sub-indices showed little variation or were somewhat weaker when compared to June. New orders stand at -12.1, shipments slipped to -8 and unfilled orders to -18.3 (from -12.5), while delivery orders lost almost three points (-10.7). There was also some erosion in the labour market conditions sub-indices. No relief from the price front with the prices paid index climbing to 75.6 from 69.3, but prices received slipping slightly to 28.8 from 29.7. The 6-month outlook index fell too, notably to 18 from 21.3 previously.

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Published on  Fri, Jul 18 2008, 10:30 GMT