June Housing Starts, Federal Open Market Committee, GDP forecast

July 19, 2016

Tuesday – July 19

The Commerce Department reported on Tuesday that June Housing Starts rose 4.89% from May to an annual rate of 1.189 million units versus the 1.165 million expected. May was revised lower to 1.135 million from 1.164 million. Single-family starts, the largest in the market, increased 4.4%. However, new construction has slowed in the past year. June 2016 Housing Starts were 2% lower than the 1.213 million units recorded in June 2015. Building Permits increased 1.5% from May to an annual rate of 1.153 million versus 1.150 million expected. The housing sector continues to be a bright spot in a “muddling along” economy.

Next week the regularly scheduled two-day Federal Open Market Committee meeting will begin on Tuesday and end on Wednesday with the 2:00 p.m. ET release of the monetary policy statement. After the late June decision from the United Kingdom to exit the European Union and the weak May Jobs Report, there is virtually a zero percent chance of a hike in the short-term Fed Funds Rate. The Fed Funds Rate is the interest rate at which depository institutions lends funds maintained at the Federal Reserve to other depository institutions overnight.

On the U.S. economic front, the Atlanta Federal Reserve Bank lowered its forecast for Gross Domestic Product (GDP) in 2016 to 2.4% on July 6, from the 2.6% forecasted on July 1. Back on May 4, the forecast called for growth of 1.7%. In addition, the International Monetary Fund lowered its forecast for U.S. growth to 2.2% from 2.4%, citing a weak energy sector, a strong dollar and turbulence abroad. The growth rate of real GDP measured by the U.S. Bureau of Economic Analysis (BEA) is a key metric of the pace of economic activity.