February Housing Permits Grow 28.5%
According to the Census Bureau, there were 66,700 housing permits filed in February 2013. This is the highest number of housing permits filed in February since February 2008. Also, housing permits grew at a rate of 28.5% compared to last February. The month-over-month growth rate has trended down since its peak in October 2012. Consequently, the annual rate of change fell for the first time since October 2011. In the last year, housing permits have jumped up noticeably from where they were in 2009-2011. However, the level of housing permits is still close to the bottom of previous recessions.
In the current environment of zero interest rates from the Federal Reserve, the real Fed funds rate is a good leading indicator of housing permits. While the real Fed funds rate is still negative, which encourages borrowing, the year-over-year change in the rate has increased for six consecutive months. Last month, I indicated that this trend in the real Fed funds rate was pointing towards a decelerating rate of growth in housing permits. It appears that the February data shows that housing permits are now decelerating.
We use housing permits as an early leading indicator for the following industries: appliances, custom processors, furniture, hardware, HVAC, off-road and construction machinery, petrochemical processors, plastics and rubber, pumps, valves and plumbing products, textiles, cloting and leather goods, and wood and paper. In general, housing permits are a very good leading indicator for the production of plastic product.
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