Economy Watch: Homebuilders Confidence Rises Unexpectedly

By Dees Stribling, Contributing Editor

Despite sluggish sales in recent months, builder confidence in the market for newly built, single-family homes rose four points in June to reach 49 on the National Association of Home Builders/Wells Fargo Housing Market Index, which was released on Monday. That’s one point shy of the optimism-pessimism threshold for builders; at 50 and over, more consider building conditions good than not.

All three index components posted gains this month. Most notably, the component gauging current sales conditions increased six points to 54. The component measuring sales expectations in the next six months rose three points to 59, but the buyer traffic component continued to drag things down, even though it increased by three points to 36.

“Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase,” NAHB chief economist David Crowe notes. “Builders are reacting accordingly, and are moving cautiously in adding inventory.”

Industrial production rises in May

U.S. industrial production rose 0.6 percent in May after declining 0.3 percent in April, the Federal Reserve reported on Monday. The decrease in April was revised upward, since it had previously been reported as 0.6 percent.

Manufacturing output increased 0.6 percent in May after having moved down 0.1 percent in April. The output of mines in May gained 1.3 percent and the production of utilities dropped 0.8 percent. At 103.7 percent of its 2007 average, total U.S. industrial production in May was 4.3 percent above a year earlier. The capacity utilization rate for total industry increased 0.2 percentage point in May to 79.1 percent, which is 1 percentage point below its long-run (1972–2013) average.

Separately, the Federal Reserve Bank of New York reported on Monday in its June 2014 Empire State Manufacturing Survey that business conditions for New York manufacturers improved significantly for a second consecutive month. The headline general business conditions index was 19.3, a reading nearly identical to last month’s multiyear high.

Wall Street had an up-and-down day on Monday, but finally ended in the plus column (barely). The Dow Jones Industrial Average was up 5.27 points, or 0.03 percent, while the S&P 500 and the Nasdaq gained 0.08 percent and 0.24 percent, respectively.