US: Housing data rises further questions about th direction of the economy - ING

Rob Carnell, Chief International Economist at ING warns that the sharp decline in housing starts and permits in March (-7.7% and -8.8% respectively) raises further questions about the direction of the US economy.

Key Quotes:

“Housing starts and permits turned down sharply in March – this was one of the better performing bits of the US activity, and raises further questions about the direction of the economy.”

“With talk of recession in the US economy beginning to gain traction again ahead of what will probably be a very weak 1Q16 GDP release next week (just after the April FOMC meeting), we are looking for evidence on either side of the argument to help us update our forecasts and confirm or deny the recession argument.”

“We feel the evidence for recession is quite circumstantial, with both weak and strong patches within the US economy. But one of those stronger patches has been the US home building sector, and this has taken a big dent in March.”

“We have been consistently below the recently cut consensus forecasts for US GDP growth (2.0% for 2016) and remain so even now (INGF 1.9%for 2016). But the likelihood of a really weak 1Q16 GDP forecast means that we will almost inevitably have to trim our figures further. Something closer to 1.5% for the full-year would be more consistent with the sorts of numbers published for 1Q16 GDP by the NowCasters, even assuming a recovery to the 2-2.5% range for the rest of the year.”