There were two important reports on the U.S. economy released this morning. First, total industrial production in America rose in April by 0.7 percent, according to new data from the Federal Reserve Board of Governors. That was better than forecast and helped by broad strength across a variety of sectors, including a 1.2 percent jump in business equipment spending that bodes well for second-quarter U.S. gross domestic product (GDP) growth. Further, capacity utilization, sometimes used as a leading indicator of inflation and potential output, lifted to 78.0 percent last month, below estimates but still the best reading in three years.
Elsewhere, privately-owned housing starts in April grew at a seasonally adjusted annual rate of 1.287 million units, according to a new report from the U.S. Census Bureau. That was a 3.7 percent decline from March’s upward-revised print and much worse than economists anticipated. However, all of the weakness was due to a 12.6 percent drop in multi-family starts (rentals), while single-family housing starts edged higher by 0.1 percent. Regionally, housing starts rose in the South (+6.4 percent) last month and fell in the Midwest (-16.3 percent), the West (-12.0 percent), and the Northeast (-8.1 percent). As for building permits, this metric of future construction activity also softened in April but by less than expected and from an upward-revised March reading. NAHB chief economist Robert Dietz added that “tight housing inventory, employment gains and demographic tailwinds should continue to boost demand for newly-built single-family homes,” although NAHB chairman Randy Noel cautioned that “the record-high cost of lumber is hurting builders’ bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market.”
Sources: Econoday, FRBG, U.S. Census Bureau, NAHB, FRBSLPost author: Charles Couch