This content is not available in your region

U.S. housing starts fall; mid-Atlantic factory activity slows

Access to the comments Comments
U.S. housing starts fall; mid-Atlantic factory activity slows
FILE PHOTO: Development and construction continues on a large scale housing project of over 600 homes in Oceanside, California, U.S., June 25, 2018. REUTERS/Mike Blake   -   Copyright  Mike Blake(Reuters)
Text size Aa Aa

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding tumbled from a more than a 12-year high in September, but single-family home construction rose for a fourth straight month, suggesting the housing market remains supported by lower mortgage rates even as the economy is slowing.

Other data on Thursday showed a deceleration in factory activity in the mid-Atlantic region in October. A 15-month trade war between the United States and China has dented business sentiment, leading to a drop in capital expenditure and a downturn in manufacturing.

Ironically, manufacturing has borne the brunt of the trade tariffs, which the White House says are necessary to protect industries from what it says is unfair foreign competition.

Housing starts declined 9.4% to a seasonally adjusted annual rate of 1.256 million units last month as construction in the volatile multi-family housing segment dropped, the Commerce Department said.

Data for August was revised higher to show homebuilding accelerating to a pace of 1.386 million units, which was the highest level since June 2007, instead of marching to a rate of 1.364 million units as previously reported.

Economists polled by Reuters had forecast housing starts decreasing to a pace of 1.320 million units in September. Housing starts rose 1.6% on a year-on-year basis in September.

Building permits fell 2.7% to a rate of 1.387 million in September. Permits jumped to a rate of 1.425 million units in August, the highest level since May 2007.

The housing market, the most sensitive sector to interest rates, has perked up in recent months, finally benefiting from the Federal Reserve’s monetary policy easing, which has pushed down mortgage rates from last year’s multi-year highs.

But the sector, which accounts for about 3.1% of the economy, continues to be constrained by land and labour shortages. A survey on Wednesday showed confidence among homebuilders jumped to a more than 1-1/2-year high in October.

Builders, however, said they “continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy.” The 30-year fixed mortgage rate has dropped more than 135 basis points to an average of 3.57%, according to data from mortgage finance agency Freddie Mac.

Further declines are likely with the Fed expected to cut interest rates for the third time later this month to limit the drag on the economy from the trade war, which has weighed on business spending and manufacturing. The U.S. central bank cut rates in September after reducing borrowing costs in July for the first time since 2008.

Economist expect a mild rebound in residential investment in the third quarter after it contracted for six straight quarters, the longest such stretch since the 2007-2009 recession.

Single-family homebuilding, which accounts for the largest share of the housing market, rose 0.3% to a rate of 918,000 units in September, the highest level since January. Single-family housing starts fell in the Northeast, West and Midwest, but rose in the populous South.

Permits to build single-family homes rose 0.8% to a rate of 882,000 units last month, the highest level since February 2018.

Starts for the volatile multi-family housing segment plunged 28.2% to a rate of 338,000 units in September. Permits for the construction of multi-family homes dropped 8.2% to a rate of 505,000 units last month.

U.S. financial markets were little moved by the data.


In a separate report on Thursday, the Philadelphia Fed said its business conditions index fell to a reading of 5.6 in October from 12.0 in September. The survey’s measures of new orders and employment rose. The region covers eastern Pennsylvania, southern New Jersey and Delaware.

A survey from the New York Fed on Monday showed a measure of business activity in New York state edged up, though the outlook over the next six months remained subdued.

The Philadelphia Fed survey’s measure of prices received by manufacturers in the mid-Atlantic region fell in October, as did a gauge of prices paid by factories. The survey’s six-month business conditions index rose to a reading of 33.8 this month from 20.8 in September. Its six-month capital expenditures index increased to 36.4 from a reading of 25.9 in the prior month.

U.S. manufacturing activity tumbled to a more than 10-year low in September.

Though President Donald Trump announced a temporary truce in the trade war last Friday, which delayed additional tariffs that were due this month, economists saw little change in fortunes at factories without all import duties being rolled back. The fading stimulus from last year’s $1.5 trillion tax cut package is also contributing to manufacturing’s woes.

Manufacturing, which makes up about 11% of the economy, has also been hurt by an inventory glut, especially in the automobile sector, and design troubles at Boeing <BA.N>.

The troubles in manufacturing have contributed to a slowing economy and demand for labour. Still, layoff remain low amid a shortage of workers.

In a third report on Thursday, the Labor Department said initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 214,000 for the week ended Oct. 12.

Economists had forecast claims rising to 215,000 in the latest week. The four-week moving average of initial claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 1,000 to 214,750 last week.

Last week’s claims data covered the survey period for the nonfarm payrolls component of October’s employment report. The four-week average of claims rose 2,000 between the September and October survey period, suggesting little change in the moderate pace of job growth.

But a strike by about 48,000 workers at General Motors <GM.N> could weigh on employment gains in October. Striking workers, who did not receive a paycheck during the payrolls survey period, are counted as unemployed. GM and the United Auto Workers union reached a tentative deal on Wednesday to end the month-long strike.

Payrolls increased by 136,000 jobs in September, down from 168,000 in August.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

euronews provides breaking news articles from reuters as a service to its readers, but does not edit the articles it publishes. Articles appear on for a limited time.