New residential construction in December rose substantially more than expected, posting a 12.1% increase last month (seasonally adjusted annual rate). Yours truly and several consensus forecasts were looking for a solid but considerably lesser growth rate of around 3.0%, as I noted yesterday. The key point, of course, is that the housing recovery remains on track, as today's update reminds in rather convincing terms.
Housing starts are near a five-year high. A similarly bullish trend also describes the recent data for newly issued housing permits, which are considered a leading indicator of starts. Although permits rose only marginally in December, that's enough to keep this series near a five-year high as well.
From a business cycle perspective, today's housing report data delivers another positive number for the December economic profile. Last month's tally of housing starts is nearly 37% above the year-earlier level.
Starts are one of the indicators in The Capital Spectator Economic Trend Index (CS-ETI), and with the latest news this data series enters the December column with a familiar refrain: growth. As I noted in last week's update of CS-ETI, recession risk remained low, based on available data. A week later, the observation still stands; in fact is considerably stronger, after a week of economic updates.
In the last few days we learned that both retail sales and industrial production posted gains in December and, more importantly, remained in positive territory on a year-over-year basis. Housing starts round out the week with a third installment of encouraging news.
In short, it's all but certain now that 2012 escaped recession. That's no surprise, of course. A broad reading of the numbers all along has routinely told us that the economy's momentum was firmly in the positive column, as CS-ETI has shown for months. Yes, the data points for personal income and spending numbers for December are yet to come. And there's always the potential for data revisions that paint a far darker cyclical picture. Anything's possible, as always. Based on the available numbers, however, the case is quite firm for expecting that the final analysis on the business cyclical history for 2012 will declare the year as one that was recession-free.