Housing, manufacturing could lift economic growth
Economists estimate home construction picked up in April.
A solid retail sales report last week fueled hopes that consumer spending is perking up in the current quarter, a shift that’s expected to drive a rebound from meager economic growth the first three months of the year.
Data this week should reveal whether the housing sector and manufacturing will also be positive contributors to growth.
Homebuilder sentiment has been healthy, partly because contractors are buoyed by President Trump’s vows of tax cuts and deregulation. In addition, consumer demand for new homes has held up amid steady job and income growth, and house-hunting traffic and mortgage applications have been elevated, Nomura economist Lewis Alexander says. At the same time, construction has been tempered by a limited supply of lots that can be developed, a labor shortage and rising construction costs. Cost could edge up further after the White House slapped Canada with countervailing duties on its lumber shipments to the U.S., a move that was denounced by the National Association of Home Builders (NAHB). All told, economists expect NAHB to report
Monday its index of builder sentiment held steady at a solid 68 in May, down somewhat from the high of 71 in March.
While builders are upbeat, housing starts have been choppy this year. Unusually warm winter weather pulled forward many starts to January and February, which led to a decline in March. Alexander reckons the robust labor market spurred a comeback in April, noting single-family building permits, a signal of future starts, have been strong.
Economists expect the Commerce Department on Tuesday to report a 3.2% rise in housing starts to a seasonally adjusted annual rate of 1.3 million.
Industrial production also has been volatile. Early in the year, the warm weather suppressed household demand for utilities, offsetting factory output that has been bolstered by an improving global economy and energy sector. In March, the opposite occurred as a surging utility demand more than made up for a drop in factory production. In April, all areas seemed to be pulling in the same direction. Manufacturing output likely rebounded while utility usage climbed steadily and oil and gas output picked up, Alexander says. Economists expect the Federal Reserve to announce that industrial production rose a sturdy 0.5% in April.
Economists expect NAHB to report Monday that its index of builder sentiment held steady in May.