In April, new residential construction in the US jumped to the highest level in more than seven years, fuelling hopes that the country's economy will bounce back after disappointing GDP growth data in the first quarter of the year.
Housing starts soared 20.2 per cent to a 1.14 million annualised rate, the most since November 2007, from a 944,000 pace in March, the Commerce Department said in a report published today (May 19th).
Permits for future home construction jumped 10.1 per cent to a 1.14 million-unit rate, the highest since June 2008.
This beats estimations, with economists polled by Reuters forecasting that groundbreaking would increase to a 1.02 million-unit pace and permits would rise to a 1.06 million-unit rate last month.
Analysts believe the health of the housing sector, along with a solid labour market, will help lift the US economy over the April-June period, following sluggish growth in the first quarter of the year.
"Housing demand is clearly picking up," David Sloan, a senior economist at 4Cast Inc. in New York, told Bloomberg. "Housing should show quite strong momentum over the next few quarters. Permits also suggest solid underlying demand."
Doubts about the future of the US economy remain
The US economy expanded by only 0.2 per cent in the first three months of the year, hampered by a strong dollar and low consumer spending during the harsh winter, sparking fears about the future of the world's largest economy.
Meanwhile, recent figures showing a weakness in consumption, business spending and manufacturing have prompted economists to lower their second-quarter growth estimates, according to Reuters.
Many investors now believe that the Federal Reserve will not raise interest rates before months. US Federal Reserve Chicago president Charles Evans's recently stated that the central bank should hold back from raising short-term interest rates this year. "It likely will not be appropriate to begin raising the fed funds rate until sometime in early 2016," he said.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.