Friday, January 17, 2020
Ahead of today’s opening bell, we see a huge positive surprise in new Housing Starts for the month of December: gains of 1.608 million seasonally adjusted annualized units rose 16.9%, compared to expectations of 1.375 million, or a drop of 0.4% month over month. This represents the best single-month Housing Starts number since way back in March 2006, and underscores a big boost in demand for existing homes.
Not only that, but at the same time existing homes are experiencing new-found strength, homebuyers’ appetite for multi-family units see a massive jump as well, up 72% year over year. Economists have been waiting a long time for housing to gain some traction, especially in our historically strong domestic economy that shows both very low unemployment and very low interest rates. It would seem this grip has at last taken hold.
Building Permits slipped a bit, to 1.416 million from an anticipated 1.473 million. This represents a 3.9% drop, as compared to -1.5% expected. But these are the cold weather months when we tend to see dormant new housing construction, and permits are a forward indicator of new starts. Also, if high demand in the housing market sustains, we expect these permits figures to go much higher as well. Further, we can expect numbers this strong in housing to have a measurable positive effect on GDP.
Economist Steve Liesman, on CNBC’s “Squawk Box” this morning, unveiled a graph on Private Resident Fixed Investment over the last several quarters. Not including results from today, he showed that fixed investment in private residences was actually up after six straight negative quarters — not registering a positive level since Q4 2017. He also said the next quarter is expected to be even hotter; these figures continue to point the same direction as new starts for the housing market in the U.S.
Gross Domestic Product (GDP) numbers for China have come out today as well, with results largely in-line with expectations: +6.1% growth in 2019 was neither a positive nor negative surprise, but still represents the slowest annual growth in 30 years. Fourth quarter GDP rose 6.0%, also in-line with estimates. Analysts see the “phase one” trade deal with the U.S., which lifts tariffs on billions of dollars’ worth on Chinese exports to the U.S., will have a positive effect on future GDP numbers. Currently, however, even with upward revisions most see China’s GDP lower than 6% for full-year 2020.
Industrial Production and Capacity Utilization numbers for December have also been released before regular trading opens this Friday, and both headline numbers came pretty much in-line with estimates: -0.3% industrial production follows the previous month’s +1.1% initially reported, while 77.0% on capacity utilization rose 10 basis points from expectations, but lower than the upwardly revised 77.4% from November. For production, today’s result puts a cap on a rather negative full-year 2019, which recorded 7 months registering in negative territory.
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