ECONOMIC UPDATE

Posted by Bruce W. Woolpert on Mar 18, 2015

ECONOMIC UPDATE

Construction of new U.S. homes increased 14.6% in June to an annualized rate of 629,000. Multi-family (apartments, condominiums) starts advanced 30%, while single-family starts rose 9.4%. All four of the nation’s regions showed gains. Compared to a year ago, housing starts were up 16.7%. Although the gains are good news for the economy, the annualized number of homes is still low by historical standards (in a normal year new housing starts would be at least double the current rate). Sales of existing homes fell -0.8% in June to an annualized rate of 4.77 million. 

The reduction came from an increase in cancelled purchase contracts, likely driven by an uncertain economy. Most of the decline was due to condominium sales, which dropped 7%. Single-family home sales were unchanged. Across the regions, sales rose slightly in the Midwest, were stable in the South, and fell in the Northeast and West. Compared to a year-ago, the median existing-home price was up 0.8% to $184,300 nationwide.

The Conference Board’s Leading Economic Indicators for June showed an improvement indicating the general direction of the economy is improving even though that improvement is slow. New weekly Jobless Claims were 418,000. In a normal economic recovery, new Jobless Claims would drop to 250,000 – 300,000 people. A resumption of layoffs by U.S. businesses that are not experiencing the sales growth rates that they had expected is a continuing concern for American consumers. A budget plan for the Federal Government which showed a commitment to reducing spending and reducing the annual budget deficits (now $1.4 trillion per year) would help to restore confidence in U.S. Treasury debt which is held 50% by individuals and countries outside the United States.

If a sell-off were to occur for this debt, bond prices would be pushed down and interest rates would go up. While the focus in Washington has been on raising the debt ceiling, the amount of deficit spending is a larger concern for investors who purchase U. S. backed debt instruments.


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