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Housing Starts, Building Permits Positive but Tempered; Plus PG, TRV

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Tuesday, October 20, 2020

One of the bright spots of this long “pandemic economy” we’ve been enduring is an economic metric with the added benefit of undergirding domestic household investment: home-ownership. Historically low interest rates on mortgages, along with motivation of many in areas of the country to start over in a new home in a new location, have strengthened Housing Starts and Building Permits. The September reads were released before the bell this morning.

On the headline, Housing Starts underwhelmed: +1.415 million seasonally adjusted, annualized new units last month was below the 1.450 million analysts were looking for. This is up 1.9% month over month, which is just half of what had been expected. The previous month’s revision was ratcheted downward, from 1.416 million initially reported to 1.388 million today.

But look beneath this mild disappointment and see that year over year, single-family home ownership is up 24%. Plots of land are being bought for new housing construction at a healthy clip, as well, indicating demand in this space is quite strong. Multi-family units, which require less new construction than single-family, also bounced back from August numbers, but is still creating a drag on what would otherwise be very healthy single-family unit growth.

Building Permits for September reflects this point: 1.553 million seasonally adjusted, annualized units was up 5.2% month over month, whereas expectations for 1.518 million, up 3.4%. The August revision shifted slightly upward, and, as we know, building permits are a forward indicator of future starts.

Basically, the takeaway here is: don’t pay too close attention to month-over-month misses. There is enough demand in the home-building market — where construction jobs would be plentiful, giving a boost to the overall economy, etc. — that, as long as mortgages are inexpensive and people retain an interest in moving (to say nothing of Millennials finally entering the home ownership market in a major statistical way), this will sustain the economic benefits going forward.

Procter & Gamble (PG - Free Report) posted a strong fiscal Q1 2021 earnings report this morning, beating on the bottom line by 20 cents per share to $1.63, and notably beyond the $1.37 reported in the year-ago quarter. Sales of $19.32 billion surpassed expectations by 5.4%.

Shares are up marginally on the news; P&G — which owns brand names like Bounty, Charmin, Tide, Pampers and Head & Shoulders — has not missed earnings estimates in five full years, with a trailing 4-quarter average beat of more than 8%. The company has also upped guidance. For more on PG’s earnings, click here.

Travelers Companies (TRV - Free Report) , which has been saddled with a Zacks Rank #5 (Strong Sell) rating ahead of its Q3 earnings release, also beat estimates on both top and bottom lines this morning: $3.12 per share outpaced the $2.91 expected and $1.43 per share a year ago, with $8.24 billion topping the Zacks consensus by 2.5%, and bettering the $8.01 billion reported in the year-ago quarter. Shares are up 1.7% on this news in early trading, but are still down more than 16% year to date. For more on TRV’s earnings, click here.

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