Housing Permits Contract for Fourth Month

(Negative) There were 95,800 housing permits filed in July 2016. Comapred with one year ago, housing permits decreased 6.1 percent. This was the fourth month of contraction in a row. The annual rate of growth decelerated to 2.1 percent, which was the slowest rate of growth since October 2011, which was just one month into the current expansion. Just based on recent housing permit data, the annual rate of change will continue to decelerate in the upcoming months and will likely start to contract before the year is over, perhaps even as early as next month.

The real 10-year treasury rate was 0.77 percent in July 2016, falling below 1 percent for the second month in a row. Since the Fed announced it was raising its overnight rate, the real 10-year treasury rate has dropped each of the last eight months. Falling rates typically indicate accelerating growth in housing permits. Changes in the interest rate lead changes in housing permits and construction spending by about 12 months on average.

We use housing permits as an early leading indicator for the following industries: appliances; custom processors; furniture; hardware; HVAC; off-road/construction machinery; petrochemical processors; plastics; plastic/rubber products; pumps/valves/plumbing products; textiles/clothing/leather goods; and wood/paper products.