Home Building Acceleration Hints at Momentum in U.S. Economy

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Economists still divided on how upbeat the housing market should be about last month’s housing start numbers

May 20, 2015
Home Building Acceleration Hints at Momentum in U.S. Economy

The New York Times reports that there was a pick up that far exceeded economists’ expectations in home building across the U.S. in April.

Residential construction last month increased 20.2 percent over March to a seasonally adjusted annual rate of 1.135 million. According to the Commerce Department, this is the highest number since 2007. The rise in home building suggests that the economy has moved on from its halt during the first quarter and is getting back on track.

Although the increase brings housing starts back to a million, most economists aren’t overly upbeat about the reading. Steven Ricchiuto, chief economist at Mizuho Securities, tells the New York Times that “the numbers need to be kept in perspective,” and it was simply a sign that the housing market is returning back to normal after a cold and snowy start.

More upbeat analysts see the housing start increase as a reflection of the general economy’s improvement.

In a statement to clients, Chief Economist at Pantheon Macroeconomics Ian Shepherdson said: “This report demolishes the idea that the economy — outside the oil sector — suffered some sort of real seizure in the first quarter. It didn’t; it was just battered badly by a winter nearly as grim as last year.”

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