April industrial production, retail sales, housing starts slip; permits rise

May 29, 2003
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Housing starts slid 7 percent, seasonally adjusted, from March to April but remained 3 percent higher than in April 2002, the government reported recently.

Single-family starts fell 3 percent for the month but rose 6 percent from the year-ago month. Housing with five or more units tumbled 22 percent for the month, to a six-year low, and 14 percent from April 2002.

Building permits, generally a reliable indicator of near-term future construction, rose 1 percent, seasonally adjusted, for the month and 3 percent from a year before. Single-family permits rose 1 percent and 4 percent, respectively, while permits for five or more units slipped 1 percent and 4 perecemt.

The National Assn. of Home Builders reported that its housing market index, a monthly gauge of builders' sentiment, rose four points to 56 in May, regaining much of the ground it lost earlier this year due to poor weather, war and economic jitters.

Freddie Mac reported that the average 30-year mortgage rate dropped from 5.62 percent to 5.45 percent, again setting a new low in the 32-year history of the survey. The Mortgage Bankers Assn. of America reported that mortgage applications held steady last week, with another rise in refinancing applications.

Together, the single-family permit, builders' sentiment, interest rate and mortgage application data suggest that the market for new and existing single-family housing will remain strong.

The consumer price index for urban wage earners and clerical workers (CPI-W without seasonal adjustment), used to adjust wages in many construction and other labor agreements, rose 2.3 percent over the year. Average weekly earnings rose 2.7 percent in the year through April, or 0.4 percent net of change in the CPI-W. Construction workers' earnings fell 0.3 percent before inflation, 2.5 percent after, as hourly pay rose 2.4 percent but average weekly hours worked fell.

The producer rice index for construction equipment edged up 0.1 percent in April after dropping 0.1 percent in each of the prior two months. It is up 1.3 percent for the past 12 months.

Among intermediate goods, BLS noted, "The index for materials and components for construction advanced 0.2 percent in April, after inching down 0.1 percent in March. Prices for gypsum products went up 5.1 percent, following a 3.0 percent decline in the prior month. The indexes for mineral wool for structural insulation, treated wood, and paving mixtures and blocks also rose, after falling in March. Prices for softwood lumber, steel mill products, and plywood declined less in April than they did a month earlier.

By contrast, prices for concrete products turned down 0.5 percent in April, following a 0.1 percent increase in March. The indexes for fabricated structural metal products, cement, and wiring devices also fell, after advancing in the previous month."

The PPI for crude materials for further processing in construction fell a seasonally adjusted 1.1 percent in April after rising 0.2 percent in March. That index is down 1 percent from April 2002.

Production of construction supplies fell 0.8 percent for the month and 3.1 percent over 12 months. Capacity utilization in manufacturing, an early indicator of demand for factory construction, fell for the third straight month, to 72.5 percent of capacity.

A survey of utility contractors conducted in early May found that 67 percent of the 86 who were aware of the temporary 30 percent "bonus depreciation" (expensing or immediate write-off) for new equipment enacted last year prompted their companies to buy.

One-third of 99 respondents said enactment of the 50 percent bonus passed by the House last week would "definitely cause us to purchase new equipment." The full survey is at www.depreciationbonus.org/pdf/nuca-aed-tax-study.pdf.

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