Housing Permits Up 9.5% in March
According to the Census Bureau, there were 83,000 housing permits filed in March 2014. This was an increase of 9.5% compared to one year ago. This is the second month in a row that the month-over-month rate of growth accelerated. However, the annual rate of growth continued to decelerate, as it has done since April 2013. Based on the one- and three-month rate of change curves, the annual rate of change will continue to decelerate the next couple of months.
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 change in the real Fed funds rate has been trending down year over year since April 2013. A continued decline in the year over year change in real interest rates would be positive for the housing market. However, unless inflation picks up, it will be difficult for the year over year change in the real Fed funds rate to move much lower after the first quarter of 2014. The most likely scenario is that the rate of growth in housing permits will continue to decelerate throughout 2014. Although, the falling year-over-year change in the Fed funds rate in 2013 may moderate the rate of deceleration in housing permits in 2014.
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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