- Ted Wieseman, an economist at Morgan Stanley
The US housing sector enjoyed a healthy performance in April, with housing starts surging to the highest level in more than seven years, while building permits also soared more than expected in the reported month. The data provided a hopeful sign for the American economy, which has been struggling to regain steam after a dismal first three months of the year. Groundbreaking jumped 20.2% to an annualized rate of 1.14 million, the most since November 2007, up from a 944,000 pace in March, according to the Commerce Department. Permits increased to a 1.14 million annualized rate, a sign construction will remain strong this month. They were expected to climb to a 1.06 million pace after 1.04 million in the previous month. An improving labour market and mortgage costs close to multiyear lows have been boosting residential construction, a sign that the weakness in early 2015 was temporary and due to harsh winter weather. The strength in housing comes in stark contrast with weak consumption, business spending and manufacturing, which has forced economists to revise downwards their second-quarter growth estimates and raise doubts that the Federal Reserve will raise interest rates before the end of 2015. The official data last month showed the US GDP grew at a 0.2% in the March quarter. Yet, weak March trade and inventories data suggested the economy actually contracted. The government will release GDP revisions next week.
© Dukascopy Bank SA