The 5.5% U.S. May housing starts drop
The 5.5% U.S. May housing starts drop with a 4.9% permits decline left a disastrous report, with additional weakness via a 0.7% decline in starts under construction and downward March and April starts revisions. Analysts saw a larger drop in multifamily than single family starts, with weakness in the south and midwest. Starts and permits are showing a two-quarter unwind of a Q4 surge, while completions were strong through Q4 and Q1 before a Q2 pull-back. Weakness since February can be partly discounted as an unwind of winter boosts from mild weather, but analysts have lowered most of our Q2 housing forecasts. Analysts expect starts to contract at a 26% rate in Q2 after rates of -3% (was -2%) in Q1 and 39% in Q4, while permits fall at a 15% rate in Q2 after rates of -3% in Q1 and 19% in Q4. Completions should contract at just a 1% rate in Q2 after growth rates of 9% (was 11%) in Q1 and 34% in Q4. Analysts lowered our Q2 GDP growth estimate to 2.4% from 2.5%, with real residential investment growth of 3% (was 5%) in Q2 after a 13.8% Q1 clip, nonresidential investment growth of 4% in Q2 after a 23.0% (was 28.4%) Q1 surge.