Announced this morning, Housing Starts were 1,311,000 in October, less than expected and a -3.1% decrease from the previous month. The decrease is larger than the previous month. In addition, Building Permits were 1,416,000 in October, also less than expected and a -0.6% decrease from the previous month. Each of these data points are likely somewhat affected by the impact of the hurricanes.
Overall, a weak report for housing as both starts and permits were less than expected. Part of the weakness could be attributed to the impact of the hurricanes, but other areas of the country also experienced some weakness. While housing is only 4% of GDP, its activities feed into other areas of the economy. A cautious stance from builders could have a dampening effect if it persists. Following the election, new policies from Washington will be closely watched as they could give some confidence to builders in the months ahead.
Meanwhile, consumers are still discerning given they are spending more of their income on food than they have historically, as discussed by Wal-Mart in this morning’s earnings results. However, Wal-Mart’s US comparable sales for the quarter were higher than expected and overall spending on services has grown in recent weeks given recent ISM data. How the Federal Reserve digests the totality of these data, including housing, spending, inflation, and the labor market will be key for the markets in the weeks ahead.
In all, the 10-year US Treasury yield ticks lower following the report and equity futures are also lower as we head into the market open.
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