- Millan Mulraine, deputy chief economist at TD Securities
US housing starts and building permits dropped in November, but the underlying trend points to consistently improving housing market, albeit the recovery appears to be uneven. Groundbreaking declined 1.6% in November from the preceding month to a seasonally adjusted annual rate of 1.028 million units, the Commerce Department reported. October's housing starts were revised up to a pace of 1.045 million units. Meanwhile, building permits, a leading indicator of construction, dropped 5.2% to 1.035 million in November. Housing market recovery continues to be restrained by tepid wage growth, which has been far outpaced by home price gains. Higher mortgage rates are also a constraint, although they have dropped from a high reached in September 2013. On top of that, the housing recovery also is being challenged by a very slow pace of household formation, as high jobless rate among young people is forcing many to either continue living with their parents or share quarters with friends or relatives.
Separately, activity in the US manufacturing sector continued to rise, albeit at a slower rate in December. The preliminary manufacturing PMI fell to 53.7 in the reported month, down from 54.8 points in November. The index surged to 53-month high of 57.9 in August and has been following a downward trend since then.
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