US economic data

us-data-17-11-16

U.S. housing starts surged to a more than nine-year high in October as builders ramped up construction of both single and multifamily homes, offering hope that housing will contribute to economic growth in the fourth quarter.

Groundbreaking jumped 25.5 percent to a seasonally adjusted annual pace of 1.32 million units, the highest level since August 2007, the Commerce Department said on Thursday. The percent increase was the biggest since July 1982. Starts increased in all four regions last month.

September’s starts were unrevised at a 1.05 million-unit rate. Economists polled by Reuters had forecast housing starts rising to a 1.16 million-unit pace in October. Residential construction has been a drag on gross domestic product for two straight quarters.

Single-family home building, which accounts for the largest share of the residential housing market, jumped 10.7 percent to an 869,000-unit pace in October, the highest since October 2007.

The housing market is being driven by a tightening labor market, which is starting to drive up wages.

Housing starts for the volatile multi-family segment soared 68.8 percent to a 454,000-unit pace. Starts for buildings with five units or more hit their highest level since June 2015.

Permits for future construction edged up 0.3 percent in October. Single-family permits rose 2.7 percent last month, while building permits for multi-family units fell 3.3 percent.


U.S. consumer prices recorded their biggest increase in six months in October on rising gasoline costs and rents, suggesting a pickup in inflation that potentially clears the way for the Federal Reserve to raise interest rates in December.

The Labor Department said on Thursday its Consumer Price Index increased 0.4 percent last month after rising 0.3 percent in September. In the 12 months through October, the CPI advanced 1.6 percent, the biggest year-on-year increase since October 2014. The CPI increased 1.5 percent in the year to September.

Last month’s increase in both the monthly and year-on-year CPI was in line with economists’ expectations.

Underlying inflation, however, remained moderate. The so-called core CPI, which strips out food and energy costs, climbed 0.1 percent last month after a similar gain in September. That slowed the year-on-year increase in the core CPI to 2.1 percent from a 2.2 percent rise in September.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.7 percent.

The firming inflation backdrop and labor market that is approaching full employment are likely to encourage the U.S. central bank to raise borrowing costs at its Dec. 13-14 policy meeting.

The Fed this month left interest rates unchanged but said its monetary policy-setting committee “judges that the case for an increase in the federal funds rate has continued to strengthen.” It bank lifted its benchmark overnight interest rate last December for the first time in nearly a decade.

Inflation could push higher in the coming years if president-elect Donald Trump’s proposal to boost infrastructure and defense spending is implemented. The fiscal stimulus, against the backdrop of full employment, would entail a much faster pace of interest rate hikes than currently anticipated.

Last month, gasoline prices jumped 7.0 percent after rising 5.8 percent in September. Gasoline accounted for more than half of the increase in the CPI last month.

Food prices were unchanged for a fourth straight month. Food consumed at home declined for a sixth straight month.

Within the core CPI basket, housing continued its upward march in October. Rents increased 0.4 percent last month and owners’ equivalent rent of primary residence rose 0.3 percent after gaining 0.4 percent in September.

Medical care costs were unchanged for a second month as a rise in hospital services was offset by a decline in the cost of doctor visits. Prices for prescription medicine rose 0.2 percent, slowing from September’s 0.8 percent gain. There were increases in the prices of a range of other goods last month, including new motor vehicles and apparel.


The number of Americans filing for unemployment benefits fell to a 43-year low last week, pointing to a rapidly tightening labor market that could allow the Federal Reserve to raise interest rates next month.

Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 235,000 for the week ended Nov. 12, the lowest level since November 1973, the Labor Department said on Thursday.

Claims for the prior week were unrevised.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 89 straight weeks. That is the longest run since 1970, when the labor market was much smaller.

Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 257,000 in the latest week.

A Labor Department analyst said there were no special factors influencing last week’s data and that no states had been estimated. Last week’s data included the Veterans Day holiday and claims tend to fall during weeks including a holiday.

As such, last week’s drop likely exaggerates labor market strength. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 6,500 to 253,500 last week.

The claims data covered the survey period for November nonfarm payrolls. The four-week average of claims rose 1,500 between the September and October survey periods, still pointing to solid job gains this month. Employment increased by 161,000 jobs in October.

The strong labor market, viewed as being at or near full employment, and steadily rising inflation are expected to encourage the Fed to hike interest rates at the Dec. 13-14 policy meeting. The U.S. central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid decreased 66,000 to 1.98 million in the week ended Nov. 5, the lowest reading since April 2000.

The four-week average of the so-called continuing claims fell 19,250 to 2.02 million. That was the lowest level since June 2000.

 

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