Must Read

Economic and and financial news and analysis

Support the Wall Street Examiner! Choose your level of support to receive a free proprietary report as my thanks. Click the button below to see your options. Become a Patron!

VA Disability Scandal; Deny, Delay Until They Die – Chriss Street

My May report disclosed that despite a 40% increase in budget and approximately $194 million in annual bonuses, the Department of Veteran’s Affairs (VA) backlog of disability claims doubled, and claims outstanding for more than a year skyrocketed by 2000% since 2008.  The burgeoning scandal appeared to cause the VA to suspend bonuses.  But my […]

Verdict Is In: “The Banking Lobby Is Simply Too Strong To Allow It To Happen” – Wolf Richter- Testosterone Pit

“A culture of dangerous greed and excessive risk-taking has taken root in the banking world,” said Senator McCain last week. Senator Warren told Wall Street, where failure has been rewarded with bailouts and record bonuses, that “Banking should be boring.” They were pitching the “21st Century Glass-Steagall Act.” Wall Street must have gotten the willies.

What’s behind the slowdown in residential construction? Sober Look

Given yesterday’s poor housing starts report, some economists are raising concerns about the sustainability of the positive momentum in residential construction.

The primary explanation for the latest decline seems to be the slowdown in apartment construction.

NAHB: – “While demand for new homes and apartments has grown considerably over the past year, builders are still being very careful not to get ahead of the market, and today’s report reflects that cautious approach,” said Rick Judson, Chairman of the National Association of Home Builders (NAHB) and a home builder from Charlotte, N.C.

“The large dip in multifamily production in June follows a boost of activity in May, and is consistent with the volatility that has come to characterize that sector as well as the uneven pace of the housing recovery,” noted NAHB Chief Economist David Crowe. “That said, the fact that single-family starts and permits both rose in three out of four regions in June is a positive sign that’s in keeping with our forecast as well as recent surveys in which single-family builders have registered an increasingly positive outlook.” The annualized rate of multifamily production declined 26.2 percent to 245,000 units in June after a 28.2 percent gain in the previous month.

Some have also attributed the slowdown to weather conditions.

There is another issue however that nobody wants to discuss. Anecdotal evidence suggests that the sudden rise in interest rates has spooked some developers who decided to cool things down a bit – at least until there is more certainty around rates and economic growth (we’ve seen glimpses of this earlier).

There is no question that construction will resume on its upward path, if for no other reason than demographics. The US population is growing at the rate of roughly 2.3 million per year and construction rates are just not keeping up.

But even a temporary slowdown in construction (particularly if caused by policy uncertainty) is bad news for the US economic growth, which remains fragile.

WSJ: – The weaker-than-expected housing activity could weigh even further on second-quarter growth estimates, which have already dropped below 1%.

BNP Paribas economists on Wednesday said the drop in June housing starts could shave 0.1 percentage point off their forecast of 0.8% annualized growth of gross domestic product in the second quarter.

From our sponsor: