Housing starts plus retail sales both suffered setbacks, while layoffs enjoyed a decent drop.
Starts on construction of private housing in May dropped 5.5 percent to an annual rate of 1.092 million, the Census Bureau and the Department of Housing and Urban Development reported last week. This was well below market expectations of a pace of 1.227 million, and marked an eight-month low. Compared to last year, May’s starts were 2.4 percent off from May 2016’s rate of 1.119 million. Starts on single-family homes in May dropped to 3.9 percent to a rate of 794,000.
Permits issued for construction of private housing in May saw similar performance, dropping 4.9 percent to an annual rate of 1.168 million. This was well off from market expectations for permits to grow to a pace of 1.25 million. Compared to last year, May’s permits were 0.8 percent below May 2016’s rate of 1.178 million. Permits issued for construction of single-family home fell 1.9 percent for the month to a rate of 779,000.
For a housing market that has had its eye keenly fixed on housing supply as a primary mechanism for controlling price, the news wasn’t exactly welcome.
“The recent stall in homebuilding is bad news for growth,” PNC Financial Chief Economist Gus Faucher told the New York Times. “A shortage of construction workers may be weighing on the construction industry, and in some parts of the country short supply of land to build on is also a factor.”
Retail sales for May fell 0.3 percent to $473.8 billion, the Census Bureau reported last week. This marked the biggest monthly drop in 16 months, and came as a surprise given that the market had expected 0.1 percent growth for the month. This was essentially a reversal of April’s 0.4 percent gain to $475 billion. That said, when compared annually, May’s sales were 3.8 percent higher than May 2016’s sales.
Gas stations were a key driver for May’s contraction, suffering a 2.4 percent drop in sales, as were electronics and appliance stores, which fell 2.8 percent. Also, department store sales fell 1 percent and sales for miscellaneous retailers dropped 1.3 percent.
“I think big-box [stores] are going to continue to struggle until they reinvent themselves,” Ron Friedman, a partner at accounting and consulting firm Marcum who co-heads the firm’s retail and consumer products, told the Los Angeles Times. “… I think the idea of just getting in the car and going shopping may not happen as much,” he added.
Initial Jobless Claims
First-time claims for unemployment benefits filed by the newly unemployed during the week ending June 10 dropped to 237,000, a decline of 8,000 claims from the prior week’s total of 245,000 claims, according to last week’s report from the Employment and Training Administration. The week’s total beat market expectations of 240,000 claims.
The four-week moving average — considered a more stable measure of initial jobless claims — ticked up to 243,000, a slight gain of 1,000 claims from the preceding week’s average of 242,000 claims.
This marked the 119th week that initial claims have fallen below the 300,000-claim level, which economists consider an indicator of a growing job market.
This week, we can expect a light calendar of economic reports, due to the holidays:
Wednesday — Existing home sales for May from the National Association of Realtors.
Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for May from The Conference Board.
Friday — New home sales for May from the Census Bureau.
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