Saturday, 18 July 2009

US housing starts increase, end of recession looks imminent

Friday added to mounting evidence that US housing is near a bottom. From Bloomberg:

Housing starts in the U.S. unexpectedly rose in June as construction of single-family dwellings jumped by the most since 2004, signaling the market is stabilizing even as unemployment worsens.

The 3.6 percent increase brought starts to an annual rate of 582,000, the highest level since November and followed a 562,000 pace in May that was higher than previously estimated, the Commerce Department said today in Washington...

The Commerce report showed building permits, a sign of future construction, climbed 8.7 percent to a 563,000 annual rate, the highest level of the year.

This is good news for the US economy, which itself looks like it is near a bottom, according to ECRI. From Reuters:

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index slipped to 118.1 in the week to July 10 from a revised 119.0 the prior week, which ECRI originally reported at 118.5.

The index's annualized growth rate surged to a five-year high of 7.0 percent from 6.2 percent one week ago, which was revised higher from 5.4 percent.

It was the gauge's highest yearly growth rate reading since the week ended May 14, 2004, when it was 7.1 percent.

Barry Ritholtz warns about reading too much into Friday's housing figures, but nevertheless posts a commentary from Lakshman Achuthan, co-founder and managing director of ECRI, that describes how strong the signal from the leading indicators have been. Excerpt from the latter:

... We clearly have “pronounced, pervasive and persistent upswings in a succession of leading indexes of economic revival – the most powerful possible predictor of a business cycle recovery. What is impressive here is the degree of unanimity within and across these leading indexes, along with the classic sequence of advances in those indexes. Such a combination of upturns does not happen unless an end to the recession is imminent...”

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