US housing starts hit 8-month low; building permits weak
WASHINGTON: US homebuilding fell for a third straight month in May to the lowest level in eight months as construction activity declined broadly, suggesting that housing could be a drag on economic growth in the second quarter.
Housing starts weakened despite a dearth of properties on the market, which is hurting sales and boosting prices. Economists blame shortages of labour and land for the downturn. Demand for housing remains strong, underpinned by a tightening labour market.
“The recent stall in homebuilding is bad news for growth,” said Gus Faucher, Chief Economist at PNC Financial in Pittsburgh. “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.” Housing starts dropped 5.5 cent to a seasonally adjusted per annual rate of 1.09 million units, the Commerce Department said on Friday. That was the lowest level since September 2016 and confounded economists’ expectations for a rise to a 1.22 million-unit pace.
Homebuilding fell 2.4 per cent on a year-on-year basis. Building permits last month fell 4.9 per cent to a pace of 1.17 million units, the lowest level since April 2016.
The housing data added to weak reports on retail sales, manufacturing production and inflation in tempering expectations of a sharp acceleration in economic growth in the second quarter. Another report on Friday showed a dip in consumer sentiment in early June.
Housing has contributed to gross domestic product for two straight quarters. The Atlanta Federal Reserve cut its estimate for second-quarter GDP to a 2.9 per cent annualised rate from a 3.2 per cent pace. The economy grew at a 1.2 per cent pace in the first quarter.
Single-family homebuilding, which accounts for the largest share of the residential housing market, decreased 3.9 per cent to a 794,000 unit-pace last month, also the lowest level in eight months. Single-family home construction has lost momentum since racing to near a 9-1/2-year high in February. Single-family building permits fell 1.9 per cent to a 779,000 unit-rate.