US: Single-family housing activity picks up after March softening - Nomura

Analysts at Nomura note that US housing starts fell 3.7% m-o-m to 1287k saar in April, slightly above their forecast but below market expectations (Nomura: -4.1% m-o-m to 1265k, Consensus: -0.7% to 1310k), driven by a sharp 11.3% decline in volatile multifamily starts.

Key Quotes

“Single-family starts, on the other hand, increased 0.1% with positive revisions to March. Single-family permits also rebounded in April, increasing 0.9% after a 4.0% decline. The positive reading for single-family starts and permits alleviates some concern from the March report about single-family activity softening. Similar to housing starts, total building permits decreased 1.8% m-o-m, driven by a 6.3% m-o-m decline in multifamily permits. Given that multifamily activity dragged down headline starts and permits, we expect today’s declines to be largely transitory.”

“The industrial production and housing starts released today fit neatly with the solid April retail sales and May’s Empire State data from yesterday. Taken altogether, momentum in consumer, industrial, manufacturing and housing activity appears to be firming in Q2.”

GDP tracking update: Single family starts in April came in slightly better than we expected, implying higher residential construction spending than we anticipated in Q2. Moreover, auto assemblies in April were stronger than we anticipated, implying more auto inventory buildup in Q2. The weather-driven increase in electric and gas utilities was slightly weaker than we expected and offset increased contribution from auto inventory building. Our Q2 GDP tracking estimate is unchanged at 3.4% q-o-q saar.”

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