Archive for the 'National' Category

Wells Fargo Reports: Housing Starts Hit an Air Pocket Somewhere in the South

Wells_Fargo_Securities_logoHousing starts plunged 9.3 percent in June, following a downward revision to the previous month’s data. June’s drop was primarily concentrated in the South where overall starts plummeted 29.6 percent.

Housing Starts Hit An Air Pocket Somewhere in the SouthHousing starts came in much weaker than our below-consensus forecast, and activity for May was revised down as well. While residential construction activity has clearly been disappointing, we believe the latest numbers overstate the extent of the weakness.

Housing starts rose in every region of the country except the critically important South, where they plunged 29.6 percent. The drop in the South seems odd given the region’s strong economic performance. Job and income growth have generally been robust in the South. Population growth has also increased, particularly in the region’s major markets such as Texas, Florida, Atlanta, Nashville and the Carolinas. The NAHB Homebuilders’ Survey did not detect any weakness in the South during the past few months, posting a 5-point rise in June and tacking on another 1-point rise in July. The decline in housing starts in the South is also out of proportion relative to permits, which have declined in recent months but were nearly 23.5 percent higher than starts in June. The large gap between permits and starts suggests that something is odd in the June housing starts data for the South, and that we should see a rebound in July.

Housing Starts Hit An Air Pocket Somewhere in the SouthExcluding the South, which typically accounts for half of new home construction, housing starts actually rose 14.6 percent in June. Starts increased 28.1 percent in the Midwest, 14.1 percent in the Northeast and 2.6 percent in the West. Single-family starts were mixed, however, falling 3.7 percent in the Northeast, while rising 10.5 percent in the Midwest and 3.2 percent in the West.

Even with June’s disappointing figures, overall housing starts and single-family housing starts through the first six months of 2014 are running slightly ahead of their year-ago pace. That is a sore consolation considering the disappointing housing activity in 2013. This year’s numbers, however, were held back by the harsh winter weather. The rebound from that period may have wreaked havoc with the seasonally-adjusted data. The greater problem for housing moving forward is lackluster demand for new single-family homes and shortages of lots, materials and labor in many of the strongest markets. The apartment market also appears close to topping out, with vacancy rates beginning to inch up and a multitude of projects on track to be completed in coming years. Permits for new multifamily projects fell 14.9 percent in June, following a 15.6-point plunge in May.

Housing Starts Hit An Air Pocket Somewhere in the SouthWhile it is hard to ignore June’s weak housing starts data, homebuilders do appear to be a bit more optimistic. The NAHB survey came in stronger than expected in July and builders reported both stronger current and future sales and increased buyer traffic. June’s drop in starts strikes us as odd and we expect a rebound in coming months.

Source: NAHB, U.S. Department of Commerce and Wells Fargo Securities, LLC

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ABC Reports: Construction Materials Prices Inch Higher in June

CEU2“Prices for inputs to construction industries have now risen in five of the year’s first six months.” —ABC Chief Economist Anirban Basu.

PPI July 2014Overall construction materials prices increased by 0.1 percent in June and are up 1.9 percent year over year, according to the July 16 producer price index release by the U.S. Department of Labor. Nonresidential construction materials prices also expanded 0.1 percent for the month and are 1.4 percent higher than one year ago.

“Prices for inputs to construction industries have now risen in five of the year’s first six months,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This marks a significant departure from the previous year’s remarkable stability. Recent monthly gains have been modest—0.1 percent in June and unchanged in May; however, the surprisingly upbeat economic news from China (Chinese GDP grew 7.5 percent in the second quarter), along with a slew of large construction starts in specific regions of the U.S., suggest that prices may continue to rise—albeit modestly— through the second half of 2014.

“A number of international conflicts could apply upward pressure on material prices,” said Basu. “The Middle East is as turbulent as ever and as construction volume increases, any supply-related disruptions could lead to a period of meaningful price inflation.

“The effects of the metal financing scandal at Qingdao port in China—the world’s seventh busiest port— are also yet to be seen,” said Basu. “In May, Chinese authorities launched an investigation into Decheng Mining, a private metals trading firm that used fraudulent warehouse receipts to obtain several loans against a single cargo of metal. As more firms take legal actual against Decheng, we simply do not know the extent to which the financing fraud will impact the metals market.”

Crude energy materials prices expanded 1.2 percent in June and are 6 percent higher than one year ago. Natural gas prices fell by 1.5 percent in June and have now fallen in three of the past four months. Overall, the nation’s wholesale goods prices expanded by 0.4 percent in June and are up 1.9 percent year over year.

The following materials prices increased in June.

Crude petroleum prices increased 3.2 percent in June and are up 5.6 percent from June 2013.

Crude energy materials prices expanded by 1.2 percent in June and are 6.0 percent higher year-over-year.

Softwood lumber prices expanded 2.3 percent and are 7.3 percent higher than one year ago.

Prices for plumbing fixtures expanded 0.4 percent in June and are up 2.4 percent on a year-over-year basis.

Concrete products prices expanded 0.4 percent in June and are up 3.5 percent on a yearly basis.

Steel mill products prices rose 0.5 percent for the month and are 4.1 percent higher than one year ago.

Five of the 11 key construction inputs did not experience price increases for the month.

Prices for prepared asphalt, tar roofing, and siding declined 1 percent for the month and are down 6.6 percent on a year-over-year basis.

Fabricated structural metal product prices remained flat for the month but have increased 1.3 percent on a year-over-year basis.

Iron and steel prices declined 0.2 percent in June but are up 4.6 percent from the same time last year.

Nonferrous wire and cable prices remained flat on a monthly basis but are down 1.6 percent from June 2013.

Natural gas prices shed 1.5 percent in June but are 12.9 percent higher than one year ago.

To view the previous PPI report, click HERE