A perspective on USA economic data – a relationship between new Housing Starts and Industrial Production (yr-on-yr % growth).
It has long been said that new housing starts in USA is a leading indicator, for the USA economy and for commodities consumption. These (below) data, over the past 5 ½ decades, support a relationship between housing starts and industrial production. Importantly it appears that a significant (and sustained) fall in housing starts (from positive to negative growth) generally precedes a fall in industrial production. However the lead time can be as much as 12-24 months.
Housing Starts for November recorded -7.0% yr-on-yr growth, after seven consecutive months of positive yr-on-yr growth. USA’s November Industrial Production data recorded +5.2% yr-on-yr growth, in the 59th consecutive month of positive yr-on-yr growth (from January 2010).
December 2009 was the first positive (yr-on-yr%) month for USA housing starts after a streak of 48 consecutive negative (yr-on-yr% growth) months for housing starts (from December 2005), which encompassed the global financial crisis.
The most comparable other periods since 1960 were the 1975 recession and the 1980-82 (double-dip) recession.
The burning question is whether the November 2014 housing starts growth is the warning of a new down-trend for USA industrial production, or is merely a short lived dip?
This week’s Matau Advisory – Commodity Review, for the wk ended 19 December, will contain further data on the November 2014 housing starts result, and on outlook for USA and 17x other key economies.
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