There were two important reports on the U.S. economy released this morning. First, manufacturing activity in the Mid-Atlantic region of the country expanded at a much slower pace this month, according to new data from the Federal Reserve Bank of Philadelphia (FRBP). Specifically, the general business conditions index plunged from 25.7 to 11.9 in August, significantly worse than anticipated and the weakest headline reading since November 2016. Under the hood, measures of new orders, shipments, staff size, hours worked, and capital expenditures all deteriorated in August, but forward-looking (six months ahead) gauges generally improved. Although this was a disappointing report, the monthly survey data can be quite volatile, and any print above zero still implies net activity expansion. Further, another regional report released by the New York Fed earlier this week signaled an uptick in business activity in August, suggesting that manufacturers across the country are having different reactions to higher inflation and the uncertainty surrounding U.S. trade policy.
Elsewhere, privately-owned housing starts in July grew at a seasonally adjusted annual rate of 1.168 million units, according to new data from the U.S. Census Bureau. That was a 0.9 percent increase from June’s downward-revised print but a significantly smaller rebound than expected following the largest monthly drop in more than two years. Regionally, housing starts rose in the Midwest (+11.6 percent) and the South (+10.4 percent) last month but fell in the West (-19.6 percent) and the Northeast (-4.0 percent). As for building permits, this metric of future construction activity improved slightly in July, but homebuilder optimism continued to soften. NAHB chairman Randy Noel in a press release yesterday said that builders are “Increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.” NAHB chief economist Robert Dietz added that “Builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber. These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges.”
Sources: Econoday, FRBP, FRBNY, U.S. Census Bureau, NAHB, FRBSL
Post author: Charles Couch