In this morning’s data, Housing Starts were just 1,177,000 in May, much less than expected and a -15.4% decrease from the previous month’s revised figure. In addition, Building Permits were 1,413,000 in May, slightly less than expected, and a -0.7% decrease from the previous month.
Overall, both housing starts and building permits dropped in May and were less than expected. Housing starts were significantly lower, highlighting the difficulties in the housing market in the current environment. Both housing starts and building permits have been range-bound since 2022, given the strong interest rate increases at that time to deal with high inflation. Even though housing is only 4% of GDP, its activities are linked to other areas of the economy, as individuals employed in construction, manufacturing, and related industries tend to spend money in other economic sectors.
Considering this report, all eyes will be on Kevin Warsh as he assumes the chair of the Federal Reserve at a time when the housing industry remains range-bound, and inflation is above the Fed’s target. How well the consumer holds up amidst this dynamic, considering the prospect of lower oil prices, will be key for the markets and the economy in the weeks ahead.
In all, the 10-year US Treasury yield ticks lower this morning, and equity futures are mixed as we head into the market open.
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