New residential construction in December
rose substantially more than expected, posting a 12.1% increase last
month (seasonally adjusted annual rate). Yours truly and several
consensus forecasts were looking for a solid but considerably lesser
growth rate of around 3.0%, as I noted
yesterday. The key point, of course, is that the housing recovery
remains on track, as today's update reminds in rather convincing terms.
Housing starts are near a five-year high. A similarly bullish trend
also describes the recent data for newly issued housing permits, which
are considered a leading indicator of starts. Although permits rose only
marginally in December, that's enough to keep this series near a
five-year high as well.
From a business cycle perspective, today's housing report data
delivers another positive number for the December economic profile. Last
month's tally of housing starts is nearly 37% above the year-earlier
level.
Starts are one of the indicators in The Capital Spectator Economic
Trend Index (CS-ETI), and with the latest news this data series enters
the December column with a familiar refrain: growth. As I noted in last week's update of CS-ETI,
recession risk remained low, based on available data. A week later, the
observation still stands; in fact is considerably stronger, after a
week of economic updates.
In the last few days we learned that both retail sales and industrial production
posted gains in December and, more importantly, remained in positive
territory on a year-over-year basis. Housing starts round out the week
with a third installment of encouraging news.
In short, it's all but certain now that 2012 escaped recession.
That's no surprise, of course. A broad reading of the numbers all along
has routinely told us that the economy's momentum was firmly in the
positive column, as CS-ETI has shown for months. Yes, the data points
for personal income and spending numbers for December are yet to come.
And there's always the potential for data revisions that paint a far
darker cyclical picture. Anything's possible, as always. Based on the
available numbers, however, the case is quite firm for expecting that
the final analysis on the business cyclical history for 2012 will
declare the year as one that was recession-free.