Analysts at Nomura note that the US housing starts came in at 1168k saar in July, below expectations (Nomura: 1220k Consensus: 1260k) and up only a modest 0.9% m-o-m from a downwardly revised 1158k in June (previously reported as 1173k).
Key Quotes
“Both single-family (+0.9%) and multifamily housing starts (+0.7%) did not rebound robustly in July after sharp declines in June. Continued softness appears consistent with recent weak readings for permits.”
“Both residential construction and sales were soft in Q2. Incoming data suggest that they will remain so in Q3. However, we believe that some part of the recent slowdown will likely be transitory and aggregate housing starts will recover albeit at a gradual pace in 2018 as strong economic fundamentals continue to offset supply-side constraints.”
“Looking ahead, recent improvement in incoming permits data, which increased 1.5% mo-m to 1311k in July (Nomura: 1295k, Consensus: 1310k), points to a potential pickup in housing starts in the coming months. However, given the recent weakness in the multifamily housing sector, it is unclear if multifamily housing starts will pick up materially in the medium term.”
“Overall, supply-side constraints, including skilled construction labor shortages and rising building material costs, will likely hinder robust growth in the near term.”
“GDP tracking update: Weaker-than-expected housing starts in July and downward revisions to previous months suggest more drag from residential investment on real GDP growth in Q2 and Q3. After rounding, however, our tracking estimates remain at 3.9% qo-q saar for Q2 and 3.1% for Q3.”
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