Housing Starts Fall, Jobless Claims Plunge, Industrial Production Rebounds

- Housing Starts for October fell to 2014K versus estimates of 2070K and an upwardly revised 2134K in September.
- Building Permits for October fell to 2071K versus estimates of 2160K and an upwardly revised 2219K in September.
- Initial Jobless Claims for last week will fall to 303K versus estimates of 324K and 328K the prior week.
- Continuing Claims rose to 2793K versus estimates of 2790K and 2790K prior.
- Industrial Production for October rose .9% versus estimates of a 1.0% increase and a 1.3% decline in September.
- Capacity Utilization for October rose to 79.5% versus estimates of 79.6% and 78.9% in September.

BOTTOM LINE: US housing starts fell in October and building permits dropped, suggesting higher mortgage rates are chipping away at home construction after four straight years of record sales, Bloomberg reported. Starts fell 10.8% in the West, 10.5% in the Mid-West, 7.5% in the Northeast and .5% in the South. Backlogs are 15% high than a year earlier, which suggests a substantial slowdown is unlikely.

The number of Americans filing first-time claims for state unemployment benefits fell to a seven-moth low of 303,000 last week, evidence of an improving labor market, Bloomberg reported. Consumer spending rose last month which suggests increased hiring is raising incomes. 333,500 people a week have filed claims so far this year versus 343,000 last year. The four-week moving average of claims fell to 321,500 from 335,000 the prior week. The unemployment rate of people eligible for benefits which tracks the US unemployment rate held steady at 2.2%. The upcoming jobs report should exceed expectations.

US industrial production rose .9% in October, the most since May 2004, as manufacturers recovered from the Gulf Coast hurricanes and a strike ended at Boeing, Bloomberg said. The mining component of industrial production, which includes oil and gas production, fell .5%. I expect production to remain strong over the coming months as more energy production, shut-in from the hurricanes, comes back on-line. Capacity Utilization is still below the long-term average of 81.0. Historically, inflationary pressures do not become worrisome until utilization approaches 85.0.