US Q2 GDP tracking 3.2% after June CPI and housing starts

Housing Starts

Total US housing starts rose solidly in June, following a surge in permits last month. Total starts rose 9.8% m/m, to 1.174mn units, slightly higher than above-consensus forecast of 1.114mn (consensus 1.106mn). The increase was driven by multi-family starts, which rose 29.4% m/m (to 489k units).  Single-family starts were down a modest 0.9% m/m, to 685k. On a regional basis, starts rose in the Northeast and the South.  Starts were flat in the Midwest but fell nearly 6% in the West.

"It was expected that, a sharp decline in permits following a surge in permit activity in May instead, permits rose 7.5% in June and are up 30% y/y.  Housing starts should continue to receive a boost in coming months from the rise in permits. This release is consistent that, the housing market is likely to continue to recover this year. The revised quarterly profile for starts activity leaves estimate of residential construction spending and residential investment through June little changed. Q2 GDP tracking estimate was unchanged at 3.1% as a result", says Barclays.

CPI

The elements of the CPI that use to deflate core retail sales in tracking of real PCE growth were a bit weaker than expected in June. A modest decline in PCE control group prices on the month suggests that the weak June retail sales report in part reflected price changes. The modestly weaker-than-expected price growth boosted our estimate of Q2 real PCE growth a scant one-tenth, to 3.2%, notes Barclays.