Home Blogs Chemicals and the Economy US housing starts down 17% as tax incentives end

US housing starts down 17% as tax incentives end

Chemical companies, Consumer demand, Economic growth, Financial Events
By Paul Hodges on 17-Jun-2010

US housing Jun10.pngSpring should be a boom time for building new homes in the USA. But in fact, May’s single family housing starts (bottom chart) fell 17.2% versus April, as the $8k tax credit ended. Yet affordability should be high, with prices down 30% from the peak, and mortgage rates at the lowest levels for decades.

This picture mirrors yesterday’s news on European autos. As many feared, the stimulus programmes have not created new demand, but merely brought forward existing demand, with buyers taking taxpayer’s money whilst it lasted.

The top chart, also from the Wall Street Journal, also confirms how industrial production (and chemical demand) has rebounded under the influence of seasonal factors and stimulus incentives. But although May’s 1.2% rise is welcome news, it means the index is still only just above 2002 levels.

This week’s data thus confirms the blog’s fear that although we are seeing relative improvement, this is from a low base in absolute terms. And if autos and housing demand stay depressed, this must feed through into slower chemical demand in the seasonally weaker Q3 period.