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Econ Wrap-Up: Housing Starts and Markit Manufacturing PMI

12/16/2014
By Jennifer Coombs

Housing starts remain flat, and will close out 2014 not much better than they ended last year. In November, single-family and multifamily housing starts actually moved in completely opposite directions. During the month, housing starts declined by 1.6% after rebounding by 1.7% in October. Analysts had projected a 1.038-million pace for November, however the officially reported 1.028-million unit pace was down 7.0% over last year. November strength was in the volatile multifamily component, which rebounded by 6.7% after declining by 9.9% in October. By contrast, single-family starts fell 5.4% in November after gaining 8.0% in October. On the permits side, housing permits declined by 5.2% month over month, after a 5.9% increase in October. The 1.035-million unit pace was down 0.2% over last year, and market expectations were for 1.060 million units annualized. We note that housing data is continuing to oscillate with no real evident trends. October was a positive month, but was ultimately cancelled out by November. For 2014, it looks like housing growth will be flat-to-slightly-positive over last year.

While not a major market mover, Markit’s reading of the US manufacturing purchasing managers index (PMI) confirmed the weak December data expressed in the Empire State Survey yesterday morning. The flash reading for December fell to 53.7, which is still above the 50-breakeven level, but indicative of the slowest growth in the last eleven months (see chart below). The final reading for November came in at 54.8, which was just above the 54.7 flash reading from the middle of the month. The index also noted new 11-month lows for growth in new orders and output, and employment growth in also decelerating. Cost inflation, which is a reflection of falling oil prices, is now at a 19-month low. November was a very good month for the manufacturing sector, based not only on yesterday's industrial production and Empire State Survey, but December may be another story.

Jennifer Coombs
Wall Street Strategies

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