Capacity constraints in construction may very well be slowing down the sector as housing starts have turned lower. They did rise 0.9 percent in July to a 1.168 million annualized rate but follow a sharply downward revised 1.158 million in June. July's result is far below the low end of Econoday's consensus range at 1.200 million. Year-on-year, starts are down 1.4 percent with completions, at a 1.188 million rate, down 0.8 percent and homes not started, at 175,000, up 23.2 percent. Lack of available construction labor and high costs for lumber, which are tied in part to tariffs, are negative factors.
Showing much less weakness are permits, up 1.5 percent in the month to 1.311 million which compares favorably with Econoday's 1.307 million consensus. Year-on-year, permits are up 4.2 percent with strength centered where it should be and that's single-family homes where permits are up a very solid 6.4 percent. Multi-family permits are up 0.2 percent year-on-year.
By region, the Midwest is leading the way with mid-to-high single digit yearly gains for both starts and permits. The South is close behind with the West and Northeast lagging.
The housing sector in general is lagging though the gain in permits is a plus that, by contrast, underscores the capacity issues that are slowing down active construction.
Housing starts and permits fell sharply and unexpectedly in June, both to their lowest rates since September last year. Yet June did show a gain for single-family permits which was the key positive of the report. Econoday's July consensus for housing starts is a 1.271 million annualized rate, vs 1.173 million in June, with permits seen at a 1.307 million rate vs 1.292 million in June (revised from an initial 1.273 million)