The Future Looks Brighter as Housing Permits Rose 10.4% to 1.881 Million

By | February 22, 2021

Welcome to FTR’s “Monday Morning Coffee “ blog. The following article is designed to keep busy executives up to date with the latest economic data releases. Released every Monday, this blog promises to keep our clientele updated with the latest weekly economic news and developments, highlighting its impact on the transportation, freight, and equipment markets. Hopefully, this will be an informative addition to the fine body of work associated with FTR.


Global shares struggled with a fourth straight day of losses on Friday as data showed euro-zone business activity slowing in February, while German and British 10-year bond yields touched multi-year highs, driven by bets of rising inflation. The pan-European STOXX 600 was up 0.1% on Friday, but set for its first weekly loss in February, as HIS Markit’s flash composite rose to 48.1 in February compared to January’s 47.8. The manufacturing PMI increased to 57.7 from 54.8, the highest since February 2018. The services PMI fell to 44.7 from January’s 45.4 reading. The MSCI’s world equity benchmark was up 0.1%. Global shares have been fueled by months of easy monetary and fiscal policies. Continued easy money, the rising tide of vaccinations have led to greater increases in equity markets. The anticipation of greater economy activity is starting to worry investors about inflation prospects.

Stocks on Wall Street closed near break even points as investors sold technology stocks that have rallied during the pandemic and rotated into cyclicals that benefit from pent-up demand once the coronavirus is subdued. Cyclical stocks are favored when the economy is running on all cylinders and investors see a return of demand that has been subdued in industries that favor travel and going back to work in an office. The Dow Jones Industrial Average edged up 0.98%, or 0% to 31,494.32. The Nasdaq added 9.11 points, or 0.07% to 13,874.46 and the S&P 500 dropped 7.26 points, or 0.19% to 3,906.71. For the week, the Dow rose 0.1%, while the S&P 500 fell 0.7% and Nasdaq slid 1.6% as big tech sold off. On the economic front, HIS Markit’s U.S. manufacturing PMI dropped to 58.5 in the first half of February from a final reading of 59.2 in January. Extreme weather in large parts of the United States was a factor in the decline.

U.S. initial claims for unemployment insurance are signaling instability again. U.S. initial claims for unemployment insurance benefits increased from a revised 848,000 to 861,000 in the week ending February 13. Continuing claims declined from 4.558 million to 4.494 million in the week ending February 6. Those claiming Pandemic Unemployment Assistance increased by nearly 175,000 in the week ending January 30 to 516,299 in the week ending February 13, the highest reading since mid-September. Claims remain elevated, back well above a million where they have been since the pandemic began.

The retail sales report was significantly stronger than anticipated, rising 5.3%, Following a stronger than anticipated spurt in the middle of 2020, sales had slowed to a crawl in the last quarter of the year. The stimulus checks were a factor in the rebound in sales for January. Many households found checks in the mail, or in their account in January, boosting spending. Adding to the brighter picture, another wave of stimulus is likely and the bill will be more balanced. There will likely be a sizable stimulus check and money for state and local governments and extended unemployment benefits. The outlook for spending looks good through the second quarter. The rate of vaccinations is encouraging and the outlook for economic activity looks brighter. However, COVID variants are a threat and things may not turn out as smooth as anticipated.

Industrial production rose 0.9% in January, another solid report. Manufacturing advanced 1.0%, roughly the same pace as the last five months. Storms likely hurt February production and we are still below pre-pandemic levels. The outlook for the industrial sector is still decent, although growth will moderate as spending shifts towards services in the second half of 2021.

Housing starts dropped 6% to 1.58 million annualized units in January. The drop in starts was isolated to the single-family sector, which declined 12.2% to a 1.162 million annualized units. The volatile multi-family sector increased 17.1% to 418,000 annualized units. The future looks brighter as housing permits rose 10.4% to 1.881 million, the third consecutive monthly gain. In addition, existing home sales increased 0.6% in January to 6.69 million units annualized, coming in at just below their decade-high reached last October. Mortgage rates have inched up recently but remains at multi-generational lows. The outlook for housing is still decent for the remainder of 2021.

Next week we get a look at new home sales, advance durable goods and personal income and outlays.

Latest Data

The U.S. Economy:

Retail sales turned the corner in the new year after falling in the fourth quarter. Retail sales increased 5.3% after declines of 1% in December and 1.3% in November. Massive gains were widespread, led by a 23.5% surge in department stores and a 12% jump at furniture stores and a 14.7% increase at electronics and appliance stores. Excluding gasoline and the auto sector, sales advanced 6.1%. Sales in January were up 7.4% from January 2020. Spending was helped by increased stimulus supported incomes and reductions in holiday-season restrictions. No major segments posted declines. The $600 stimulus checks were sent out in January, boosting sales and there is likely going to be more stimulus, which could include a $1,400 in direct payments to most Americans. The question is what happens when the stimulus stops? Economists hope spending will maintain as the pandemic fades, although some of that spending will shift to services. There are still downside risks if the effects of the pandemic linger and employment and incomes are slow to rebound. Averaging the last four months together, the consumer still looks dangerously dependent on stimulus.

Growth in consumer prices will accelerate in the first half of the year but will likely prove transitory and not bring too much reaction from the Federal Reserve. Consumer prices rose 0.3% in January, following two 0.2% monthly gains. In January, the CPI for food grew 0.1%, while energy prices were up 3.5%. Excluding food and energy, the PI was unchanged for a second month. The total CPI and the core index were up 1.4% in the past year. Before the pandemic, the CPI was running at near a 2.3% clip. Since there is still considerable slack in both the economy and the labor market, the Fed is likely not to make any tightening moves for some time. Energy costs have increased the past few months but are lower than a year ago. The PPI increased 1.3% in January, the largest increase since the index began in December 2009. Final demand prices rose 0.3% in December and 0.1% in November. Two-thirds of the January advance can be traced to a 1.3% rise in final demand services. The PPI for final demand goods increased 1.4%. Excluding food, energy and trade services, the PPI for final demand moved up 1.2% in January, the largest advance since that index began in September 2013. For the last twelve months ending in January, prices for final demand less foods, energy and trade services rose 2.0%, the largest increase since a 2.1% advance for the 12 months that ended in June 2019.

The manufacturing sector is handling the current wave of COVID cases and tighter restrictions better than other parts of the economy. Industrial production increased 0.9% in January. Manufacturing output advanced 1.0% during the month, about the same average as the last five months. Durable goods output increased 0.9% and nondurable goods production increased 1.2%, while other manufacturing fell 0.8%. Among durables, the largest gain was posted by primary metals, up 3.9%. Motor vehicles and parts output fell 0.7%, held back by a global shortage of semiconductors. Most nondurable goods sectors posted growth of between 1 and 2%. The output of Utilities fell 1.2% in January. Largely because of a 5.7% drop in natural gas output. Mining jumped 2.3%. Oil and gas drilling continued to advance although still down roughly 50% from a year earlier. Total IP was still down 1.8% from January 2020. Manufacturing remains down 1.0% from a year earlier. The outlook for manufacturing looks decent, although likely to moderate as spending will shift more towards the service side as the year progresses. An inventory build is a plus for manufacturing at the present time.

After a strong run, U.S. residential investment cooled off in January. Housing starts dropped 6% to .1.58 million annualized units in January. Starts were revised upwards in December to 1.68 million. The drop in starts was isolated to the single-family sector, which declined 12.2% to a 1.162 million annualized units. The volatile multi-family sector increased 17.1% to 418,000 annualized units. Leading indicators were favorable, as housing permits rose 10.4% to 1.881 million, the third consecutive monthly gain. Single-family permits increased 12.2% to 1.162 million. The multi-family component came in at 402,000. The increase in permits suggest that housing activity has more room to run. There are some constraints to activity caused labor shortages. Activity is likely to remain robust through 2021.

U.S. import prices increased 1.4% in January following a 1% gain in December. Higher energy prices were boosted in January. Imported petroleum/product prices were up 8.3% in January. Imported oil prices increased 8.2% after rising 11.8% in December. Import prices do not have any near-term implications for monetary policy, as the Fed will likely ignore the acceleration in inflation in the first half of the year as a temporary factor.

Existing home sales increased 0.6% in January to 6.69 million units annualized, coming in at just below their decade-high reached last October. Although they have increased in recent weeks, mortgage rates are still tracking near multi-generational lows in January and have helped push sales higher. Both single-family and condo/co-op sales rose in January, increasing 0.2% and 4.1%, respectively. Sales increased in both the South and the Midwest census regions, but did decline in the Northeast and the West. Tight inventories are boosting prices. There were 1.04 million homes for sale at the end of January, a 26% drop from a year earlier. The I/S ratio was 1.9 months, the lowest since the data series began in 1982. The I/S ratio was 3.0 months. The median price in January was $303,900, a 14.1% jump from January 2020. Despite a tight supply, demand is likely to remain robust in 2021, as interest rates are still low.


Business activity across the euro zone contracted again in February s lockdown measures again hammered the bloc’s service industries. Factories did have their busiest month in three years. The HIS Markit flash composite PMI did rise to 48.1 in February, compared to January’s 47.8 reading. The service PMI fell to 44.7 from January’s 45.4 reading, still well in contraction territory. The factory PMI jumped to 57.7 in February, up from 54.8 in January and the highest pace since February 2018. New factory orders soared, and employment rose above 50 for the first time in nearly two years. A recent poll by Reuters showed most economists think the euro zone has fallen back into recession, as still-high infection rates drove governments to re-impose restrictions. A surge in demand for exports did drive Germany’s manufacturing sector to a 36-month high but restrictions have pushed services into a deeper contraction.

Important Data Releases This Week

The January new home sales report will be released on Wednesday, February 24 at 10:00 AM. December sales were strong at 842,000. Inventories and mortgage rates are low and demand still strong. We look for sales to come in at 860,000 for January.

January advance durable goods orders will be released on Thursday, February 25 at 8:30 AM. The manufacturing sector has been solid and when it comes to durable goods, the recovery is almost complete. Core capital goods orders and shipments have already exceeded levels prior to the pandemic. Durable goods orders rose 0.5% in December and will rise 1.0% for January.

January personal income and outlays will be released on Friday, February 26 at 8:30 AM. Personal income will have increased at a strong rate in January, as the stimulus checks started to reach Americans. Personal income increased 0.6% in December and will likely see a 8.0% jump in January. Spending fell 0.2% in December, but January will likely see a 1.0% increase for the month.

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About Steve Graham

Steve is one of the premier analysts in the transportation equipment industry. On a monthly basis Steve tracks and analyzes in detail the trailer and heavy-duty truck industry. Aside from following these two sectors he is also instrumental in helping our customers analyze the economy and its impact on transportation and transportation equipment.