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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
US DATA
As we noted yesterday after the improvement in NAHB homebuilder sentiment, and reiterate after today's strong May housing starts/permits data, residential investment is set to turn from a drag on US GDP (as has been the case for 8 consecutive quarters) to a potential boost later this year, potentially as soon as the current quarter (Q2 2023).
- Looking more broadly, major turns in Building Permits have historically led turning points in the unemployment rate by around 1.5 years (see chart). Permits peaked at 1.9mln in December 2021, putting a labor market turn sometime in mid-2023 (ie now). The swift bottoming out of permits suggests that labor market weakness may prove temporary and limited.
- We've seen housing activity as ultimately disinflationary, with supply coming onto the market - especially in multifamily, with units under construction near all-time highs - providing some relief to rent prices. And with vacancy rates rising, huge construction now could turn out to be the foundation for economic weakness down the road.
- But for now, housing's contribution to economic activity looks to be a tailwind and not a tailwind. With such a cyclical sector boosting GDP, the probability of a H2 2023 recession is lessened, potentially allowing the Fed to keep rates "higher for longer".
Source: BLS, MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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