By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

Sign up to receive an email as pertinent data are released.

April Housing Starts Provide Some Relief

April housing starts were better today, with total starts up 20.2% and single-family starts up 16.7%. While these month-over-month gains look fantastic, the fact is they occurred off comparably sharp declines in February, so the April gains leave us only slightly above December 2014 levels. Still, after a torrent of unrelentingly soft data over the last six weeks, today's news is a welcome break.

What does it all mean? Well, when housing starts first weakened in February, the thought was that the drop was weather-related, but when starts stayed soft in March, it started to look as though something more than the weather was in play, that the starts spike in late-2014 was the anomaly, not the winter softening. Today's news points back to the weather story...mostly.

Look at the accompanying chart. Single-family starts (blue line) now look to be holding at a level just above 0.7 million units per year, with the winter declines an aberration. However, developments in housing permits (red line) are not quite as encouraging. Levels there are lower and the April bounce not quite as strong.

Similarly, much of the April bounce in starts occurred in the Northeast and Midwest, where weather certainly was an issue...and if cold weather can understate starts activity there for a month or two, then the relief from that cold weather could well lead to overstated starts for a month or two. In other words, it remains to be seen whether starts level will continue strong or fall back to a lower level.

For now, though, there is no getting around the fact that today's news was a relief. Our concern was that with US manufacturing activity softening, if there was no offset from stronger homebuilding, overall US growth could be downshifting to the 1.0%-1.5% range. The better homebuilding data today give hope that underlying growth rates will continue in the 2.0%-2.5% range that has held over recent years. At present, though, there is no indication of US growth breaking above that 2.0%-2.5% range.

Sales and Starts of New, Single-Family Homes
Retail Sales Trends Chart
Source: Census Bureau. As of 30 Apr 15.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 40 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive an email as pertinent data are released.

© Western Asset Management Company 2017. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. Investments are not guaranteed and you may lose money. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence. Potential investors in emerging markets should be aware that investment in these markets can involve a higher degree of risk. Any forecast, projection or target is there to provide you with an indication only and is not guaranteed in any way.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and members of JIAA (membership number 011-01319) and JITA. Western Asset Management Company Limited (“WAMCL”) is authorised and regulated by the Financial Conduct Authority (“FCA”). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by WAMCL.