Housing permits, always important, assume some extra weight this month considering the meltdown in the production economy suggested by last Friday's industrial production and related data.
As usual, I look at housing because it is the leading sector of the US economy, with the growth or decline tending to filter through the wider economy over the ensuing 12 -18 months. A further note: there are continuing problems with interpreting the data because NYC had a surge of permits in May and June due to the expiration of a subsidy, that skews comparisons since. But as usual I have several workarounds, because the program did not materially affect single family starts, and since we can subtract the NYC region to get a good look at what has been going on with the rest of the country.
OK, with those caveats, here are the overall numbers for permits (blue) and starts (red):
Permits tend to slightly lead starts, and starts are about twice as volatile, which is why I emphasize permits, which were positive even if behind November's pace.
Now here are permits broken down into single family homes (blue) and multi-unit structures (red):
New single family homes had their best reading of the expansion. This is a strong positive. Meanwhile multi-family units continued at a strong pace, higher than the last 30 years. The former were almost certainly affected by record warmth in the eastern half of the country in December. The latter reflect the huge Millennial generation continuing to move out of their parents' basements into condos and apartments.
There is an extra reason to discount the Northeast this month, because the extraordinarily warm December weather certainly was behind a surge of permits in the Northeast, which blew out the seasonal adjustment to the upside:
Here are permits ex-the Northeast:
The remaining parts of the country pulled back to a rate slightly behind several other months this year. This was the one significant negative in the report.
Next week there will be an update with state-by-state breakdowns. This will help us isolate the NYC effect from the December weather effect.
Bottom line: this was a mixed report, but with a bias to the upside.
Wednesday morning's CPI report, showing deflation in December, means that retail sales in real terms did not decline in December, and remain at their expansion peak. Taken together with Wednesday morning's housing report, we have pretty good confirmation that the economic downturn remains confined to the commodity and export sectors of the economy. The domestic consumer economy remains positive.