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Aug. 20, 2014

Economy Watch: Housing Starts Spike in July

By Dees Stribling, Contributing Editor

U.S. housing starts jumped in July compared with June, according to the Census Bureau on Tuesday, a reversal of the preceding months, which have been generally sluggish for housing starts. The bureau said that privately owned starts came in at an annualized rate of 1.09 million units. That’s 15.7 percent above June and 21.7 percent above the July 2013 rate.

Sometime the gyrations in residential starts are because of multifamily development, which varies considerably from month-to-month. But there was strength in July in single-family housing starts, which were at an annualized rate of 656,000 units, up 8.3 percent from June’s rate of 606,000.

Single-family starts are still fairly sluggish, July notwithstanding. For the first seven months of 2014, there have been a total of 585,000 total housing starts nationwide, up 9.1 percent from the same period of 2013. But a lot of that year-over-year increase has been apartments, which remain a hot property type. Single-family starts were up 3 percent for the period, while multifamily starts were up 24 percent.

Building permits, which are a forward indicator of the housing market, were at an annualized rate of 1,052,000 units in July, 8.1 percent above the June rate and 7.7 percent above the July 2013 rate. That gain was largely multifamily, since single-family permitting was only 0.9 percent higher in July than June.

Inflation at a very low boil

The Bureau of Labor Statistics reported on Tuesday that the Consumer Price Index increased 0.1 percent in July. Over the last 12 months, the all items CPI has increased 2 percent. Without food and energy—the so-call core rate of inflation—and the CPI was up 1.9 percent for the year.

The July increase for the CPI was the smallest since February. The cost of shelter and food rose, but those rises were partially offset by declines in energy and for airline fares. The food index rose 0.4 percent in July, with the food at home also rising 0.4 percent after being unchanged in June. The decrease in the energy prices was its first since March, featuring declines in all major energy components.

Take food and energy out of the equation and the monthly increase was also 0.1 percent. Along with the shelter, the cost of medical care, new cars and apparel all increased in July. Along with airline fares, the cost of recreation, used cars and trucks, and household furnishings all declined in July.

Wall Street had another positive day on Tuesday, maybe because of the positive housing and inflation data, with the Dow Jones Industrial Average gaining 80.85 points, or 0.48 percent. The S&P 500 advanced 0.5 percent and the Nasdaq was up 0.43 percent.

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