Housing Permits Grow for Second Month

While housing permits grew for the second month in a row, the rate of growth was tepid, resulting in a decelerating rate of annual growth.

There were 95,400 housing permits filed in December 2018, the fewest housing permits since February 2018. December’s total was the second-straight month of month-over-month growth; however, the monthly rate of growth has been tepid. Compared with one year ago, December’s permits increased 4.5 percent, which was the third consecutive month of decelerating growth. This was the slowest rate of annual growth since May 2017.

In January, the year-over-year change in the 10-year Treasury rate was -17 basis points, which was the first month the change was below zero since March 2018 and the lowest change since January 2018. The change declined for the second month in a row, indicating that the change in the 10-year Treasury rate has reversed course and is now a positive leading indicator for manufacturing, durable goods and capital equipment. 

Changes in the real 10-year Treasury rate tend to lead capital equipment consumption by a relatively long period of time – historically, 12 to 18 months. The change in the 10-year Treasury rate is a good leading indicator of housing permits and construction spending. A decreasing year-over-year change in the real 10-year Treasury rate should lead to increases in these data points down the line.

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