Housing Starts Lead Economic Indicators

There's no question the 15% increase in September housing starts was the best economic news that sector of the construction market has heard in quite some time. According to the U.S. Census Bureau, privately-owned housing starts in September were at a seasonally adjusted annual rate of 872,000.

Along with being 15% above the revised August estimate of 758,000, this figure was 34.8% above the Sept. 2011 rate of 647,000. Single-family housing starts were at a rate of 603,000, 11% above the revised August figure of 543,000. The September rate for buildings with five units or more was 260,000, 25% above August.

Alas, as with many recent economic statistics, the boost in September housing starts may have looked good, but according to Karl Case, a professor of economics emeritus at Wellesley College and a recent speaker at the McGraw-Hill Construction Outlook, it was the first time total housing starts cracked the 800,000-start level in 48 quarters. At the conference Case said that while housing is trending in the right direction, it still has a long ways to go — the 800,000-level marks the 50-year floor in housing starts.

On the bright side, the news was also pretty solid with building permits in September, too. Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 894,000, 11.6% above the revised August rate of 801,000 and 45.1% above the Sept. 2011 estimate of 616,000. Single-family authorizations in September hit 545,000, 6.7% above the revised August figure of 511,000.

Most construction economists now expect housing to show consistently good growth over the next few years.

Vital Statistics

Construction

New Construction Put-in-Place ($ billions, SAAR)

Aug '12₁ Jul '12₂ Mo. % Change Aug '11 YTY % Change Total Construction 837.1 842.0 -0.6 786.3 6.5 Total Private Construction¹ 562.2 564.8 -0.5 501.5 12.1 Residential 273.5 271.1 0.9 232.2 17.8 New single family 131.2 127.6 2.8 108.6 20.8 New multi-family 23.1 22.2 3.7 15.9 44.8 Lodging 10.8 10.8 -0.1 8.1 33.5 Office 25.5 25.6 -0.5 23.2 10 Commercial 42.4 43.0 -1.3 42.5 -0.1 Health care 30.2 30.4 -0.5 28.9 4.2 Educational 17.5 17.7 -0.9 14.3 22 Religious 3.8 3.9 -1.2 4.3 -11.7 Amusement and recreation 6.5 6.5 1.2 7.3 -10.9 Transportation 11.5 11.5 0.2 10.0 15 Communication 16.4 17.1 -3.7 17.3 -5.3 Power 75.7 78.6 -3.7 67.5 12.3 Electric 62.8 65.0 -3.4 56.9 10.4 Manufacturing 46.9 47.3 -0.7 44.2 6.1 Public construction ($ billions)² 274.9 277.2 -0.8 284.8 -3.5 Residential 6.4 6.3 1.2 8.8 -27.7 Office 10.3 10.6 -2.9 11.7 -12.2 Commercial 3.2 3.1 4.6 4.0 -20.5 Health care 11.3 10.9 3 11.3 -0.8 Educational 67.0 69.4 -3.4 72.0 -7 Public safety 10.4 10.1 3.2 10.7 -2.8 Amusement and recreation 8.7 9.1 -4.3 8.6 1.9 Transportation 25.8 26.3 -1.6 25.8 0.2 Power 9.36 9.124 2.6 8.859 5.7 Highway and street 80.8 81.3 -0.6 78.0 3.6 Sewage and waste disposal 21.5 20.9 2.7 21.5 0.2 Water supply 12.4 12.3 0.4 14.1 -12.2 Conservation and development 5.7 5.8 -3 7.6 -25.1 Housing starts (SAAR) Sep '12₁ Aug '12₂ Mo. % Change Sep '11 YTY % Change Total (thousands of units) 872 758 15% 647 35% Single-family (thousands of units) 603 543 11% 422 43% Multi-family (thousands) 260 208 25% 219 19%

Employment Wage & Price Statistics

Mo. Latest Month Mo. % Change Year ago YTY % Change Employment, Electrical Contractors (thousands) AUG 743.5 0.6 735.6 1.1 Hourly wage, Electrical Contractors ($) AUG 26.77 0.4 26.12 2.5 Copper prices (cents per pound) OCT 379.43 1.1 338.36 12.1

Industrial Market

Mo. Latest Month Mo. % Change Year ago YTY % Change Electrical Mfrs' Shipments ($ millions) AUG 3,087 -0.5 3,144 -1.8 Electrical Mfrs' Inventories ($ millions SA) AUG 4,683 0.3 4,643 0.9 Electrical Mfrs' Inventory-to-Shipments ratio AUG 1,517 0.8 1,477 2.7 Electrical Mfrs' New Orders ($ millions SA) AUG 3,093 2.7 3,134 -1.3 Machine Tool Orders ($ millions) AUG 425.51 12.3 450.74 -5.6 Industrial Capacity Utilization (percent, SA) SEP 77.43 0 pts. 75.95 1.5 pts. Purchasing Managers Index (percent) SEP 51.5 1.9 pts. 51.50 0 pts.

Footnotes: 1 - preliminary; 2 - revised; 3 - includes residential improvements; Z - less than 0.005 percent; SA - seasonally adjusted; SAAR - seasonally adjusted annual rate. Sources: Construction Put-in-Place statistics - Department of Commerce; Housing starts - Department of Commerce's Census Bureau; Electrical contractor employment numbers and hourly wage - Department of Labor; Copper prices - Metals Week; Electrical manufacturers' shipment data - Department of Commerce; Machine Tool Orders - Association for Manufacturing Technology; Industrial Capacity Utilization - Federal Reserve Board; and Purchasing Managers Index - Institute for Supply Management.

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