By Joshua Newell
WASHINGTON (MNI) – U.S. Housing Starts for May are expected to
remain low, as May floods throughout the South hindered construction and
weak economic data pointed to a slowing economic recovery.
Tornadoes in the Midwest and flooding in the Mississippi River
valley have caused widespread economic problems in their respective
Michael Englund, the chief economist of Action Economics, cited
the recent bad weather as one of the main reasons for the weak numbers,
stating, “Weather has had a negative effect, but if it normalizes there
could be an upward drift.”
According to a survey of economists by Market News International,
housing starts are expected to rise by a seasonally adjusted annual
rate of 547,000, slightly up from 523,000 the month prior when starts
are reported by the Commerce Department Thursday morning.
Jim O’Sullivan, MF Global’s chief economist, does not see this
monthly increase as a part of a larger trend, remarking, “The housing
trend has been flat since the beginning of 2009; there’s no evidence of
this changing now.”
The housing market has not seen back-to-back months of growth in
Starts since July 2010.
He pointed to the recent weak employment numbers as one reason for
a continued weak housing market. The economy only added 54,000 jobs in
May, and the unemployment rate rose to 9.1%.
Furthermore, May retail sales, reported earlier in the day,
presented a mixed picture. The report was better than expected, yet
sales still fell for the first time 11 months. This was largely due to a
decline by the auto industry. Sales ex-autos were up slightly.
As Federal Reserve Chairman Ben Bernanke affirmed in a June 7th
speech, “U.S. economic growth so far this year looks to have been
somewhat slower than expected.”
Michael Englund agrees that the housing market has not yet started
an upward trend; however, he does take an optimistic outlook of the
future, pointing out that “Inventory levels of new homes are low, so
once they clear there are positive returns to be made.”
The May Housing Starts report will be released Thursday at 8:30 AM
by the Department of Commerce.
— Joshua Newell is a Washington reporter for Need to Know News
** Market News International Washington Bureau: 202-371-2121 **