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Archive for June, 2019

Residential Construction No Longer Driving GDP Growth in U.S. or Canada

Friday, June 28th, 2019

Article source: ConstructConnect

GDP’s Underpinning from Housing Starts Weakens

The housing starts numbers that analysts key on are monthly ‘actual’ figures, in units, that have been seasonally adjusted and annualized (i.e., extrapolated to yield a yearly total). The acronym for such a calculation is SAAR − i.e., seasonally adjusted at an annual rate.

Residential Construction No Longer Driving GDP Growth in U.S. or Canada Graphic

Based on demographic factors (e.g., population growth and the rate of family formations), with consideration also given to the pace of demolitions, the annual level of new home groundbreakings in the U.S. should currently be about 1.6 million units. That would be ideal.

Instead, and as is apparent from Graph 1, the monthly U.S. SAAR figure has been mainly stuck near 1.3 million units for the past several years.

U.S. national housing starts through May of this year, 2019, have averaged only 1.238 million units SAAR, a decline of -5.5% versus the first five months of 2018. To place this in a historical context, there has not been a decline in the annual level of U.S. housing starts since 2009.

To further elaborate, a record-long ten-year expansion in the economy has been enabled by a similarly lengthy period of year-to-year positive changes in housing starts.

Sustained strength in new home construction is often a mainstay of GDP growth. When it is absent, nagging worries begin to surface about the economy’s ability to maintain good prospects.


Mid-June Economic Nuggets Focusing on Retail, Inflation and Housing Starts

Friday, June 21st, 2019

Article source: ConstructConnect

well ask, since it went by so fast − there are the following economic nuggets from various private and public sector firms and agencies to be aware of and mull over.

Mid-June Economic Nuggets Graphic

Consumer Spending Becomes Lethargic

In the ‘second estimate’ of U.S. Q1 2019 ‘real’ (adjusted for inflation) gross domestic product (GDP) published by the Bureau of Economic Analysis (BEA), the quarter-to-quarter annualized pickup was a strong +3.1%. Consumer spending, however, which usually plays a major role in GDP’s advance, was relatively quiet this time around. The Personal Consumption Expenditures (PCE) line item of GDP was only +1.3% per annum. It was soundly beaten by Gross Private Domestic Investment, +4.3%, and an improvement in net foreign trade, with exports +4.8% and imports, -2.5%. Investment was led by spending on intellectual property products, +7.2%.

A shift towards lethargic consumer spending has also become apparent in recent retail sales figures. Total U.S. retail and food services sales in May were +3.2% year over year. Retail as a standalone was +3.1% and ‘food services and drinking places,’ +3.7%. Less than a year ago, in July 2018, retail sales were +6.2% y/y and ‘restaurant, fast food, bar, and tavern’ sales, +9.6%.

Retail Sales Mainly in a Range of +3.1 to +3.7% Y/Y

Within retail, and as set out in Graph 1, several shopkeepers achieved May sales increases ranging from +3.1% to +3.7% y/y. ‘Health care and personal care stores’ rang up receipts of +3.4% y/y; ‘general merchandise stores’, +3.3%; and ‘gasoline stations,’ +3.2%. Gasoline station sales, despite drawing more from aligned variety store activities, can still be heavily influenced by fluctuations in the price of petrol. In the latest month, the price of gas was flat compared with 12 months prior, and therefore had a neutral impact on cash register receipts at service stations.

May’s Weakening in U.S. Jobs Growth and the Inverted Yield Curve

Thursday, June 13th, 2019

U.S. Jobs +75,000 in May, but Flat After Revisions

Article source: ConstructConnect

The latest Employment Situation report from the Bureau of Labor Statistics (BLS) records a gain of +75,000 in total U.S. jobs in May. The +75,000 month-to-month increase was the second lowest so far this year. February’s figure was worse at +56,000.

May’s Weakening in U.S. Jobs Growth and the Inverted Yield Curve Graphic

What’s hidden, however, unless one digs a little deeper, is the fact that total U.S. employment in May really didn’t increase at all. The total jobs number now being reported for May, at 151.095 million, is the same as the total jobs number that was published a month ago for April. The explanation lies in the fact that April’s number has been revised down by -75,000.

The national unemployment rate in May stayed extremely tight, at 3.6%, the same as in the previous April. The participation rate likewise remained steady, at 62.8%.

The composition of May’s +75,000 jobs performance was an interesting combination of only +8,000 in goods production, +82,000 in the private services-providing sector and -15,000 with government. The public sector’s jobs loss was at the state (-10,000) and local (-9,000) levels, as Washington made a minor upwards staffing adjustment (+4,000).


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