U.S. Housing Starts Decline 11% in July

Daily Forex Fundamentals | Written by RBC Financial Group | Aug 19 08 13:51 GMT |

Housing starts fell 11% in July to an annualized 965,000, generally in line with an expected drop of 9.9%. The anticipated drop reflected that fact that the 10.4% jump that occurred in June was the result of builders in the New York City area advancing activity to avoid being subject to more restrictive building code requirements that became effective on July 1. As result, regional most of the weakness was concentrated in the Northeast, with starts down 30.4%, though declines also occurred in the South (down 8.2%) and in the West (down 8.2%).

Today's housing starts numbers indicate that builders continue to respond to high inventory levels of unsold homes by limiting new construction. This ongoing weakness in housing will keep the Fed on guard against downside risks to growth in the face of continuing declines in employment and the waning of the fiscal stimulus. Our forecast assumes that these offsetting risks for growth and inflation will keep the Fed on the sidelines, holding Fed funds unchanged at 2% through the middle of next year.

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