News & Events

Economic Advisor: February 21, 2018
February 21, 2018


Housing starts enjoyed healthy growth, while retail sales fell, and consumer sentiment rose.

Housing Starts

Starts on construction of private homes in January shot up to an annual rate of 1.326 million, which marked a solid 9.7 percent gain over December’s rate of 1.209 million, the Census Bureau and the Department of Housing and Urban Development reported last week. Compared to last year, this was 7.3 percent higher than December’s pace of 1.236 million.

For a housing market starved for inventory, this was welcome news. Inventory helps control prices, which in turns fosters expanded sales volume. That said, Ian Shepherdson, chief economist for Pantheon Macroeconomics pointed to starts on single-family homes, which grew a milder 3.7 percent to a rate of 877,000, as a caution to temper any over-exuberance.

“… The underlying story here is that housing construction is grinding slowly higher, and likely will continue to do so through mid-year at least,” he wrote in a public statement.

Building permits issued for the construction of private homes grew 7.4 percent in January to hit an annual rate of 1.396 million. Compared to last year, this was also 7.4 percent higher than January 2017’s rate of 1.3 million. Meanwhile, permits issued for building single-family homes actually fell 1.7 percent to an annual rate of 866,000.


Retail sales ticked down 0.3 percent in January, falling to $492 billion, according to last week’s report from the Census Bureau. This was the biggest decline in 11 months. That said, when compared to last year, January’s performance was 3.6 percent better than January 2017’s sales.

Retail categories that saw tough hits were building material and garden stores, which fell 2.4 percent; motor vehicle and parts dealers, which saw sales shrink 1.3 percent; sales at health and personal care stores, which dropped 1.2 percent; and sporting goods, hobby, book and music stores, which dipped 0.8 percent.

Consumer Sentiment

But while sales were down, consumer outlook was up. The University Michigan Surveys of Consumers reported last week that its Index of Consumer Sentiment grew from 95.7 in January to 99.9 in February.

Why the improved sentiment despite the stock market’s recent tumbles? Surveys of Consumers Chief Economist Richard Curtin had some insights:

“Stock market gyrations were dominated by rising incomes, employment growth, and by net favorable perceptions of the tax reforms,” he said. “Indeed, when asked to identify any recent economic news they had heard, negative references to stock prices were spontaneously cited by just 6 percent of all consumers.

This week will see a lighter calendar of economic data releases due to mot reporting agencies being closed for the President’s Day holiday. We can expect:

  • Wednesday — Existing home sales for January from the National Association of Realtors.
  • Thursday — Initial jobless claims for last week from The Employment and Training Administration; leading economic indicators for January from The Conference Board.

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