Combined Housing and Manufacturing Data Doesn't Look Good For Economy

Andrew Wagner

The Homebuilding and manufacturing sectors data is sending conflicting signals regarding the economy's health.

The Homebuilding and manufacturing sectors data is sending conflicting signals regarding the economy's health, according to Barron's.

The rate of construction for new homes fell more than 10% in 2018, but, on the contrary, the output of U.S. manufacturing sector rose more than 3%. However, in 2019 data from the Commerce Department regarding the latest housing data and industrial production data from the Federal Reserve, the pattern has reversed.

U.S. production is now down about 2% since its previous peak in 2018, with the biggest declines in primary metals and machinery. U.S. manufacturing production has not moved very much in the past six months.

The homebuilding sector has rebounded since its decline last year, due to the decline in real mortgage rates. The number of new permits to build housing reached its highest point since mid-2007, as well as the number of new homes currently under construction. The rate of housing is up more than 8% since the beginning of 2019 and is expected to rise, contingent upon mortgage rates staying relatively low.

The net effect of this data has not contributed to the growth of the U.S. gross domestic product since the beginning of 2018. Typically this pattern occurs during recessions, but there are two exceptions that took place during the Korean War and Vietnam War.

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