Economic News Blog
Posted by: Steven Kline, Jr. 26. June 2013

Housing Permits Continue Strong Growth

According to the Census Bureau, there were 94,900 housing permits filed in May 2013. Housing permits grew at a rate of 25.9% compared to last May. While that is a strong rate of growth, the rate of growth is the second slowest rate of growth since June 2012. The annual rate of change has hovered around 31.0% since November 2012. The level of housing permits appears to have mvoed out of historical recession territory.

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. The real Fed funds rate increased year over year from early 2012 to early 2013. In addition, since the Fed's announcement that it might taper its purchases of bonds, interest rates on treasuries and mortgages have jumped dramatically. Therefore, interest rates are indicating that the growth in housing permits should slow down dramatically over the next six to 12 months.

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 products. In general, housing permits are a very good leading indicator for the production of plastic product.


 

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