US: Strong housing data – Nomura

Analysts at Nomura note that the US housing starts rose more than our and market expectations, but with mixed details.

Key Quotes

“Housing starts were up 5.0% m-o-m in May to 1350k saar, above expectations (Nomura: +3.0% to 1325k, Consensus: +1.9% to 1312k), from a downwardly-revised 1286k in April.”

“A 7.5% m-o-m increase in multifamily housing starts contributed to the strongerthan-expected May housing starts.”

“Single-family housing starts rose strongly by 3.9% m-o-m in May, but the gains were mostly concentrated in the Midwest (+44.4%).”

“Weak permit data also suggest increased downside risk in coming months.”

“In the near term, the strong labor market will continue to support consumer demand. However, structural constraints such as a skilled labor shortage and rising building material costs will remain negative for residential construction activity.”

“GDP tracking update: Single-family housing starts were stronger than we expected in May, but the gains were concentrated in only one region. Moreover, single-family housing permits remained weak. Thus, it appears residential construction could slow in coming months, offsetting a strong gain in May. After rounding, our Q2 real GDP tracking estimate remains unchanged at 4.1% q-o-q saar.”