In this morning’s data, Housing Starts were 1,366,000 in January, less than expected and a -9.8% decrease from the previous month. In addition, Building Permits were 1,483,000 in January, higher than expected and a 0.1% increase from the previous month.
Overall, a weak reading on housing starts, which were less than expected and down sizably from the previous month, while building permits were essentially flat. Cold weather and the impact of the recent fires in Southern California added to the slow start for the housing market at the beginning of the year. In addition, the Federal Reserve has decided in recent weeks to keep interest rates steady to combat sticky inflation, which affects interest rate sensitive parts of the economy such as housing.
While housing is only 4% of GDP, its activities feed into other areas of the economy, including direct industries, such as construction and manufacturing. Furthermore, if individuals are employed in construction and other building projects, they tend to spend more money in the economy, driving revenue and growth for many companies. Given this dynamic, the outlook for the rebuilding process for areas of the country impacted by recent natural disasters and the movements in monetary policy by the Federal Reserve will be key factors to watch in the coming weeks.
In all, the 10-year US Treasury yield is little-changed following the report and equity futures are lower as we head into the market open.
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