US housing starts rise 2.3% in Aug but permits edge down 1%

19 September 2012 14:35  [Source: ICIS news]

WASHINGTON (ICIS)--US new home construction activity rose by 2.3% in August, reversing a 1.1% decline in July, the Commerce Department said on Wednesday, but the number of building permits fell last month, suggesting a rocky road ahead for the housing recovery.

In its monthly report, the department said that housing starts in August were at a seasonally adjusted annual rate of 750,000 units, a 2.3% improvement from the downwardly revised July figure of 733,000.

However, part of the August gain in new home construction reflected a sharp downward revision to the July figures. 

The department had originally estimated housing starts in July at 746,000 but has now chopped that figure back by 13,000 units or 1.7% to 733,000.  Had that initial July estimate held, the August improvement would have been a more modest 0.5%.

In other words, the August gain appears stronger largely because the July downturn was worse than initially estimated.

But however qualified the August gains might be, last month’s advance in housing construction was attributed chiefly to a strong 5.5% improvement in work on single-family homes, considered the core of the housing industry.

In addition, new construction of single-family homes in August, put at 535,000 on a seasonally adjusted annual basis, was nearly 27% better than the pace of activity seen in August 2011.

The housing market is a key downstream consumer sector for the chemicals industry, driving demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives, roofing materials and synthetic fibres, among many others.

 The American Chemistry Council (ACC) estimates that each new home built represents some $15,000 (€11,550) worth of chemicals and derivatives used in the structure or in production of component materials.

Although the long-depressed US housing sector is widely recognised as having finally begun a slow revival, the department’s August data also suggest that the recovery road may have some potholes ahead.

The department said that the number of housing permits issued in August fell by 1% from July, in contrast to the strong 6.8% gain seen in July.

A downturn in building permits indicates that actual housing starts may show weakening numbers when the September data on residential construction are issued in October.

Building permits are issued by local governments when contractors are ready to start work on a home or apartment project, so they are seen as an accurate real-time indicator of near-term prospects for the housing sector.

US Housing Starts

 

Aug ’12

July ’12

July-Aug ’12

Aug ’11

Aug ’11 to Aug ’12

US Housing Starts

750,000*

733,000*

2.3%

581,000*

29.1%

* Seasonally adjusted & annualised

($1 = €0.77)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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