By most measures the U.S. economy remains on a very solid footing, especially when compared to other developed nations, but two clear weak spots over the past year have been real estate and manufacturing. Fortunately, a few reports released this week provided evidence that these sectors are showing signs of stabilizing. For example, total industrial production in America jumped by 0.6 percent last month, according to the Federal Reserve Board of Governors. That was significantly better than anticipated, the largest increase in a year, and the July figure was revised higher. The gains were widespread last month and included marked improvements in business equipment spending, mining, and manufacturing. Year-ago comparisons, though, continued to deteriorate, highlighting just how much additional pressure the goods-producing sector has been under recently due to the economic slowdown overseas and ongoing trade war. Further, capacity utilization, a leading indicator of potential output, rose in August to the best level since March but remained well below the long-term and pre-recession averages. It is of course far too early to sound the all clear for the manufacturing arena, but the August report at least suggests the situation is not worsening at the moment.
Elsewhere, privately-owned housing starts in August grew at a seasonally adjusted annual rate of 1.364 million units, according to new data from the Census Bureau. That was a 12.3 percent increase from July’s upward-revised print and much better than expected. Under the hood, multi-family (rental) starts surged by 30.9 percent last month and single-family starts posted a solid 4.4 percent gain. As for building permits, this measure of future construction activity also signaled broad improvements in August, including single-family authorizations in the southern region of the country, which account for more than half of all single-family permits in America, climbing to a new cycle high. Looking ahead, homebuilder confidence firmed in September to an 11-month high, helped by mortgage rates recently falling to the lowest level since October 2016. NAHB chairman Greg Ugalde, though, cautioned that “ongoing supply-side challenges” continue to hinder housing affordability, and NAHB chief economist Robert Dietz suggested that the trade dispute with China could be “holding back home construction in some parts of the nation.”
Sources: Econoday, FRBG, WF, U.S. DoC, NAHB, FRBSL