ECONOMIC NUGGETS – October 1, 2013

1. The federal government shutdown began October 1. It is unclear how long it will last. Immediate effects on the economy are minimal. Estimates are that a two-week shutdown would shave about 0.3% off real (inflation adjusted) gross domestic product (GDP) growth in the fourth quarter, some of which would be recaptured in the first quarter. The longer the shutdown lasts, the greater and more serious are the negative effects on the economy
   
2. There have already been some negative effects to the government and the economy in the lead up to the shutdown. Many government contracts were put on hold in anticipation of the shutdown. Consequently, contractors delayed hiring plans and began to furlough/lay off workers. Meanwhile, many government agencies and their employees spent time preparing for a shutdown instead of doing their normal work – a deadweight loss for all concerned
   
3. No economic data will be collected or released by the government during the shutdown. Businesses will be navigating with impaired vision
   
4. Bigger threat for the economy lies ahead: the battle over the debt ceiling. How many blows can the U.S. economy take before it falls into recession?
   
5. The most recent report on second quarter 2013 real GDP left the growth rate at the previously reported 2.5% at a seasonally adjusted annual rate (SAAR), with some minor changes in the underlying components. Among these was an upward revision in the growth rate for real investment in nonresidential structures from 16.1%  (SAAR) to 17.6%
   
6. The August AIA Architecture Billings Index (ABI) was up 1.1 points for the second month in a row to 53.8 from 52.7 in July. August marked the 12th month over the last 13 months that the ABI was above 50. A reading above 50 indicates increased billings, a positive for future commercial construction
   
7. Housing appears to be adjusting to higher interest rates. Single-family construction remains well below the nation’s long-term needs. Multifamily construction, although closer to the low end of the nation’s long-term needs than single-family construction, is below that level, leaving room to expand as demand for rental properties increases
   • Single-family housing starts jumped 7.0% to 628,000 (SAAR) in August following a 2.8% decline in July.  The 3-month moving average for single-family housing starts rose 1.7% to 606,000 in August. Year-to-date single-family starts were up 19.3% from the same period in 2012
   • Single-family building permits rebounded 3.0% to 627,000 (SAAR) in August after falling 2.6% in July.  The 3-month moving average for single-family permits edged up 0.4% to 620,000
   • The NAHB/Wells Fargo Housing Market Index (HMI) held steady at 58 in September after increasing 2 points in August. The HMI has now been above 50 for four months in a row, a positive for single-family residential construction
   • New home sales partially rebounded from July’s 14.1% plunge, climbing 7.9% to 421,000 (SAAR)  in August
   • Housing prices continue to rise, but at a slower rate. Both 10-city and 20-city S&P/Case-Shiller®  Home Price seasonally adjusted (SA) indexes have increased for 18 months in a row. In July, they were up 0.7% and 0.6%, respectively. On a year-over-year not seasonally adjusted (NSA) basis, the 10-city index was up 12.3%, and the 20-city index was up 12.4%
   • For all 20 cities,  home prices on a year-over-year NSA basis have increased for seven months in a row. On a monthly SA basis, prices fell in two cities in July: Cleveland (-0.2%)  and Minneapolis (-0.7%). For both cities, it was the third month in a row that prices were down; prices, however, were still up on a year-over-year basis for the two cities—3.9%  and 9.5%, respectively
   • The Federal Housing Finance Agency’s (FHFA) Purchase-Only Home Price Index was up 1.0% (SA) in July,  its 18th monthly increase in a row. On a year-over-year NSA basis, the index was up 8.8%
   • Multifamily housing starts tanked 11.1% to 263,000 (SAAR) in August after soaring 22.3% in July. The 3-month moving average, which smooths out most of these drastic monthly variations,  fell 6.9% to 267,000 from July. Year-to-date NSA starts were up 31.3% in August from the same period a year ago
   • The 3-month moving average of multifamily building permits dropped 7.4% in August to 310,000 permits. Year-to-date NSA multifamily permits were up 12.9% in August from the same period in 2012
   • Second quarter homeownership rate slipped to 65.1% (SA) from 65.2% in the first quarter. That is down from a peak of 69.4% in second quarter 2004, but up from the average of 64.9% for the 1990s. The flip side of the homeownership rate is the rental rate. At 34.9%, the rental rate is at its highest level since fourth quarter 1995 and may well be headed higher—a positive for multifamily construction
   • Meanwhile, the second quarter rental vacancy rate fell to 8.3% (SA) from 8.6% in the first quarter and was at its lowest level since second quarter 2001—another positive for multifamily construction
8. The Producer Price Index (PPI) for finished goods rose 0.3% (SA) in August after no change in July. On a year-over-year NSA basis, the August PPI was up 1.4%
9. A price index for inputs used in nonresidential construction, excluding capital equipment, jumped 0.5% (NSA) in August after declining 0.1% in July. The index was up 1.2% (NSA) from August 2012, while the PPI for inputs for residential construction was up 1.7%
10. The Consumer Price Index (CPI) inched up 0.1% (SA) in August after advancing 0.2%  in July. The NSA CPI was 1.5% higher than in August 2012. Core CPI, which excludes food and energy prices, also rose 0.1% (SA) after increasing 0.2% in July.  On a year-over-year basis, the index was up 1.8% (NSA) from August 2012
11. via:http://www.reedconstructiondata.com/market-intelligence/bernie-markstein/economic-nuggets-8211-october-1-2013/