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US Housing Sector Ticks Higher

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The US Census Bureau has published April’s data on Building Permits issued and Housing Starts undertaken. There were 1.08M Building Permits granted during the month, this is slightly more than the 0.99M issued in March and also greater than the amount of 1.01M anticipated by the market. 1.072M Housing Starts began in April compared to 0.946M in the month of March, the consensus estimate for this statistic was 0.980M.

Last week the chairwoman of the Federal Reserve, Janet Yellen, testified that the sluggishness in the US housing market poses one of the largest risks to the continued economic recovery. Yellen noted that housing activity has ‘remained disappointing so far this year and will bear watching’ she further commented that ‘The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery”. The US housing sector is being weighted down by a number of factors including a deceleration in income growth, more restrictive bank lending and rising mortgage rates.

Expanding on threats to the US economy the Fed chief cited rising geopolitical tensions and a slowdown in the growth rates of emerging economies as holding the potential to halt global growth and therefore adversely impact on the US recovery.

Yellen also took the opportunity to stress her concerns over the domestic labor market which she acknowledged has recently made some progress but is still ‘far from satisfactory’. The usual suspects are at play here, long term unemployment and slow wage growth are natural features of a recovering economy. An additional concern is that a growing portion of those that have recently found work are expressing a desire to enter full time employment whereas the majority of new jobs created in the US economy are on a part time basis.

In a recent Bloomberg survey, respondents favored the second quarter of 2015 as the likely time for the Federal Reserve to begin monetary tightening via interest rate increases.

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