Economic Snapshot: Builder confidence back to pre-recession levels

This week is a mix of good and coud-be-better news, so let’s start with the great news: builder confidence in the housing market is at an eight-year high.

Housing Market Index

The National Association for Home Builders’ Housing Market Index increased four points to 59 in September, up from 55 in August. This month’s reading is at its highest level since since November 2005.

All components reported improvement this month: The indexes gauging current sales conditions and traffic of prospective buyers both rose five points to 63 and 47 respectively, while future sales increased two points to 67.

Builder confidence in every region rose, with the Midwest leading the way with a five-point gain to 59 and the South followed closely behind with a four-point increase to 56. The Northeast reported a three-point gain to 41 and the West reported a two-point increase to 58.

Consumer Price Index

The Consumer Price Index posted its first decline in 16 months, falling 0.2 percent in August. The core CPI index rose 1.7 percent in the 12 months through this month, down from 2.0 percent for the 12 months ending in July.

Increases in the food and shelter indexes were offset by energy index declines, particularly gasoline, as the energy index fell 2.6 percent this month with gasoline declining 4.1 percent. Indexes for natural gas and fuel oil also decreased.

Housing Starts 

Privately owned housing starts fell this month to 956,000 units in August. While this is a 14.4 percent decline from the revised July estimate of 1.117 million, it is an eight percent increase from the previous year. Single family housing starts were 2.4 percent below the revised July figure, at 643,000 units compared to 659,000.

Privately owned housing completions were at a rate of 892,000, a 3.2 percent decrease from last month but a 16.9 percent jump from August 2013. Single family housing completions were down 8.2 percent at 591,000.

Retail Sales

Retail sales rose 0.6 percent in August, up five percent from August 2013 according to the Commerce Department and the largest gain the report has seen in over a year. This month’s report follows a 0.3 percent increase in sales from June to July.

Motor vehicles climbed 1.5 percent this month while building materials and garden equipment grew 1.4 percent, both of which suggest improvements in the housing sector. Food services and drinking places gained 0.6 percent, suggesting healthy growth in discretionary spending.

The economy expanded at a rate of 4.2 percent during the second quarter, following a 2.1 percent contraction, which is prompting many economists to increase projections for economic growth in the third quarter.

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