US housebuilding tumbled to a more than two-year low in December as construction of single and multi-family housing declined, the latest indication that the economy had lost momentum in the fourth quarter.
However, there was some good news on the economy, with other data showing a rebound in consumer confidence in January after three straight monthly declines.
Still, the economy’s outlook continues to be overshadowed by fears of a slowdown in global growth, fading fiscal stimulus, trade tensions and uncertainty over the UK’s departure from the EU.
These risks were again highlighted by US Federal Reserve chairman Jerome Powell when he reaffirmed before lawmakers the US central bank’s “patient” stance towards raising interest rates further this year.
“This [rebound consumer confidence] helps ease the sting of bad data at the turn of the year,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto.
Housing starts dropped 11.2% to a seasonally adjusted annual rate of 1.078 million units last month, the weakest reading since September 2016. Data for November was revised down to show starts at a 1.214 million unit rate instead of the previously reported pace of 1.256 million units.
Other details of the report were also downbeat, suggesting the housing market could remain sluggish for a while despite an easing in mortgage rates.
Housing completions hit a more than one-year low in December, and while building permits rose, they were driven by the volatile multi-family housing segment.
Economists had forecast that housing starts would slip to a pace of 1.25 million units last month. The release of the December housing starts and building permits report was delayed by a 35-day partial shutdown of the federal government that ended on January 25. No date has been set for the release of January’s report.
The Commerce Department said while delays in data collection could make it more difficult to determine the exact start and completion dates of construction, “processing and data quality were monitored and no significant issues were identified”.
The report added to weak December retail sales and business spending plans on equipment in suggesting that economic growth cooled down significantly at the tail end of 2018.
It also implied that residential investment likely contracted in the fourth quarter, extending a decline that began in early 2018.