US Housing Recovery Continues, while manufacturing is down..

US housing market sees the general recovery trend continue. The National Association of Home Builders (NAHB) market index hits its highest level in September (40) since June 2006. August housing starts headline comes out softer than the market expected at 750,000 against a downwardly-revised 733,000 in July. August building permits dips to 803,000 from a four-year-high of 811,000 in July. Given the monthly volatility in the building permits and housing starts data, these are small moves and have not changed the story of a general upward trend in the housing market.

September’s regional manufacturing surveys add more evidences that the US manufacturing remains soft. September's Philadelphia Fed survey headline figure improved to -1.9 against the prior month’s -7.0. Following the weaker-than-expected Empire manufacturing PMI earlier this week, this latest survey raises the risk that momentum in the industry has not yet picked up. The market focus will shift to the Chicago regional manufacturing PMI survey next Friday, which correlates more closely with the national ISM manufacturing PMI than other regional surveys.

The key data this week is the August personal spending that will be fed into the Q3 GDP. The personal spending in nominal terms is likely to have grown last month, backed by strong retail sales and a spike in gasoline prices. The personal income in August is expected to be soft given the flat monthly growth of national hourly earnings released in the prior non-farm payrolls survey report.

The recovery in housing market is still on track, reflected by data outputs in last couple of months.  The manufacturing sector has been on the soft side. Durable goods orders are likely to have fallen in August, after a 4.1% gain in July given soft ISM manufacturing new orders.  Also, the sharp contraction in non-defensive aircraft orders in August will add some downside risk to the headline index.

The Chicago PMI is likely to captures more market attention than other regional PMI surveys as it has relatively high correlation with the national headline release. Its new order sector picked up to 54.8 from 52.9 in August, yet this is softer than the 17-month high of 69.2 seen in February.

2012/09/21