U.S. home construction unexpectedly accelerated in July to the fastest pace in five months, indicating the housing industry remains an area of support for the economy.
Residential starts increased 2.1 percent to a 1.211 million annualized rate, exceeding all forecasts in a Bloomberg survey, from 1.186 million in June, Commerce Department data showed Tuesday in Washington. Permits, a proxy for future construction, were little changed.
Builders are responding to the strongest home sales since the start of the economic expansion, made possible by robust hiring and cheap financing. More houses were under construction last month than at any time since the beginning of 2008, indicating homebuilders were making headway in filling orders.
“Job growth is still the key driving indicator, but it’s still also low mortgage rates, as well as lending standards that are a bit easier in residential as a whole,” Anika Khan, a senior economist at Wells Fargo Securities LLC in New York, said before the report. “The fundamentals look sound for the housing market.”
The pace of housing starts is the second-fastest of the expansion behind the 1.213 million in both February and June 2015. The median forecast in a Bloomberg survey called for a 1.18 million rate. Estimates ranged from 1.11 million to 1.2 million.
The starts data, while very volatile from month to month, have held in a narrow range over the past year, indicating residential real estate will have trouble adding to its post-recession rebound. Still, the report showed a wide range for error, with a 90 percent chance that last month’s figure fell between a 6.7 percent decline and a 10.9 percent gain.
Permits were little changed at 1.15 million annualized rate in July, indicating there was less scope for additional gains in housing starts in coming months.
What’s more, builders already had more homes under construction in July than at any time since January 2008. The number of multifamily dwellings with five or more units under construction reached the highest level since October 1974.
Construction of single-family houses rose 0.5 percent to a 770,000 rate, also the most since February.
Groundbreaking on multifamily homes, such as townhouses and apartment buildings, increased 5 percent to an annual rate of 441,000, the most since September.
Starts rose in three of four regions, paced by a 3.5 percent gain in the South and a 2.3 percent increase in the Midwest. Construction was up 15.5 percent in the Northeast and down 5.9 percent in the West.
Gold Gained Ahead of Joe Biden Inauguration 2021
Gold price rose from one and a half month low on Tuesday ahead of President-elect Joe Biden’s inauguration on Wednesday.
The precious metal, largely regarded as a haven asset by investors, edged up by 0.2 percent to $1,844.52 per ounce on Tuesday, up from $1,802.61 on Monday.
He said, “The key factor appears to be the (U.S.) currency.”
As expected, a change in administration comes with the change in economic policies, especially taking into consideration the peculiarities of the present situation. In fact, even though Biden, Janet Yellen and the rest of the new cabinet are expected to go all out on additional stimulus with the support of Democrats controlled Houses, economic uncertainties with rising COVID-19 cases and slow vaccine distribution remained a huge concern.
Also, the effectiveness of the vaccines can not be ascertained until wider rollout.
Still, which policy would be halted or sustained by the incoming administration remained a concern that has forced many investors to once again flee other assets for Gold ahead of tomorrow’s inauguration.
Crude Oil Holds Steady Above $55 Per Barrel on Tuesday
Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.
Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.
While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.
On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”
“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.
Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.
Crude Oil Pulled Back Despite Joe Biden Stimulus
Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.
Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.
On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.
OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”
“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”
Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.
“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.
Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.
But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.
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