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New housing construction jumped 11.2% in the South in May to a seasonally adjusted annual rate of 704,000, but fell in all other regions bringing the national rate to 1.269 million and an overall decline of -0.9% from the previous month. The decline was centered in single family construction, which fell to an 820,000 rate (-6.4%), while construction of housing with 5 or more units grew +13.8% to a 436,000 rate. On an annual basis, a +8.1% increase in housing construction the South was not enough to offset drops in the Midwest (-33.1%) and the Northeast (-32.4%), which dragged annual construction down by -4.7%. As with the monthly trend, single family construction fell steeply (-12.5%) for the year but multiple unit construction rose (+13.8%).
The Federal Open Market Committee (FOMC) voted to keep the federal funds rate in the 2-1/4 – 2-1/2 percent range but lowered their 2020 projections to indicate a 1/4 percent rate drop in the next year. The assessment of household spending was altered from having slowed in the first quarter to having picked up, while business fixed investment was down downgraded to being “soft”. The report also noted that while it viewed a sustained economic expansion as the most likely outcome, uncertainties had increased, and the median longer run projection for the federal funds rate was lowered from a range of 2-3/4 – 3 to 2-1/2.
The IHS Markit Flash Composite Purchasing Managers’ Index dropped -0.3 to a 40 month low of 50.6 in June, signalling a slowdown to the weakest business expansion in three years. The Services component dropped -0.2 to 50.7, while the manufacturing component fell -0.4 to a 117-month low of 50.1. Respondents were noted as commenting on less favorable economic conditions and a heightened risk aversion, although new business expanded faster than in May, and employment continued to increase. IHS Markit commentary assessed that economic expansion for Q2 would likely slip to 1.4%, that the manufacturing downturn was increasingly affecting the service sector, and that worries about tariffs, geopolitical risks, and slowing economic growth had contributed to business optimism becoming more subdued.
Tuesday June 25 – New Home Sales
Friday June 28 – Personal Income and Outlays