By Dees Stribling, Contributing Editor
Few expected housing starts to shine in April, and according to the U.S. Department of Commerce on Tuesday, the homebuilding industry delivered on promises of woe. The annualized rate of homebuilding during the month was 523,000 houses, a drop of 10.6 percent from March. Compared to the same month last year, residential construction dropped 23.9 percent, which is the largest year-over-year decline since October 2009.
Multifamily starts, which tend to swing more freely from month to month, fell by 28.3 percent in April (for properties of five or more units). Single-family home construction, which is always less volatile, fell 5.1 percent between March and April. New building permits for all residential construction–a leading indicator–were down month-over-month as well, though not quite as much: a 4 percent slide to an annualized rate of 551,000 units. The permit rate in March had been revised down to a an annualized 574,000 units.
All that’s certainly more bad news for the industry, at least in the short run. But then again, the market has to work its way through an excessive amount of inventory as it is, and adding to that total isn’t going to help anyone in the longer term.
Geithner talks debt ceiling
Secretary of the Treasury Tim Geithner, speaking at the Harvard Club on Tuesday, covered a number of topics but highlighted the fact that he doesn’t want to be the first Treasury secretary to preside over a default by the federal government. “The debt limit, of course, relates only to commitments we have made in the past,” he noted. “Rather than debating whether we should pay our past bills and whether default would in fact be so bad; rather than designing schemes to allow us to continue to make interest payments by breaking our commitments to seniors and veterans; we should be working together to narrow our differences on how to solve the causes of future deficits.”
The secretary also took a jab at the “no tax increases for anybody ever” school of thinking popular among House freshmen. “The fundamental reality of our fiscal situation is that we will need to generate more revenue, and we will need to reduce the rate of growth in spending on health care and retirement security,” he said. “Both are necessary. Neither alone can carry the full burden.”
Geithner declined to comment specifically about the arrest of IMF Managing Director Dominique Strauss-Kahn over the weekend, at a time when the organization is dealing with various debt implosions in the European Union. But he did say that Strauss-Kahn was “not in the position” to run the IMF from Rikers. Candidates to take Strauss-Kahn’s place are already circling overhead, ready to pounce.
Wal-Mart has the U.S. market blues
Wal-Mart Stores Inc., which is large enough to be an economic force in its own right, reported on Tuesday that its same-store U.S. sales–an important metric in retail sales and especially for Wal-Mart, since its largest unit is domestic stores–dropped 1.1 percent in 1Q11 compared with 1Q10. The retail behemoth is still profitable, however. Quarterly profits were up 3 percent year-over-year, mainly because of overseas growth.
In the United States, Wal-Mart may offer low prices, but it also offers longer trips to reach its large stores. With the price of gasoline so high, cost-conscious shoppers seem to be opting for the likes of dollar stores, which are generally competitive with the giant on certain kinds of items, and also have the advantage of being a lot closer to their customer base.
Wall Street passed a lackluster day on Wednesday, with the Dow Jones Industrial Average edging down slightly to end 68.79 points lower, or 0.55 percent. The S&P 500 was down by 0.04 percent, but the Nasdaq eked out a gain of 0.03 percent.