There are a few important reports on the U.S. economy worth mentioning this morning. First, total industrial production in America rose in June by 0.6 percent, according to new data from the Federal Reserve Board of Governors. That is a welcome turnaround following the prior month’s 0.5 percent decline and was helped in part by solid gains in manufacturing, mining, and business equipment spending. Automobile production also jumped by 7.8 percent in June, which supports the argument that May’s weakness in headline output was mainly a temporary setback caused by fire-related disruptions at a major auto parts supplier. Moreover, total industrial production in June rose by 3.8 percent on a year-over-year basis, the 16th month in a row of positive annual growth. As for capacity utilization, this leading indicator of inflation and potential output lifted to 78.0 percent in June, below estimates but still one of the best readings of the past few years.
Elsewhere, privately-owned housing starts in June grew at a seasonally adjusted annual rate of 1.173 million units, according to a new report from the U.S. Census Bureau. That was a 12.3 percent plunge from May’s downward-revised print, the biggest monthly drop since November 2016, and significantly worse than economists anticipated. Both the single-family (-9.1 percent) and multi-family/rental (-20.2 percent) sectors posted sharp declines last month, and headline housing starts growth on a year-over-year basis turned negative for the first time since December 2017. As for building permits, this metric of future construction activity also softened in June, likely due to rising building costs and mortgage rates. NAHB chief economist Robert Dietz added that “Builders are encouraged by growing housing demand, but they continue to be burdened by rising construction material costs. Builders need to manage these cost increases as they strive to provide competitively priced homes, especially as more first-time home buyers enter the housing market.”
Sources: Econoday, FRBG, Bloomberg, ZH, NAHB, Census Bureau, FRBSLPost author: Charles Couch