Housing Starts, e-Commerce Rise Boosts Inflation
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More houses are being built in America, and Americans are buying more products online, which is helping inflation rise. New housing starts jumped 6.6% from the prior month to 1.17 million in April, according to a new report by the Census Bureau. Single-family building permits saw a 1.5% rise from March, and are continuing to drive the increase in housing in America.
More houses are being built in America, and Americans are buying more products online, which is helping inflation rise. New housing starts jumped 6.6% from the prior month to 1.17 million in April, according to a new report by the Census Bureau. Single-family building permits saw a 1.5% rise from March, and are continuing to drive the increase in housing in America.
The growth in housing starts indicates homebuilders expect renewed demand for new housing in America, as significantly high price growth rates are being experienced throughout the country, especially in large coastal metropolitan areas.
Many analysts are dismissing the headline numbers as misleading, however, noting that housing starts remain far below trend. In a note, analyst Peter Boockvar of The Lindsay Group wrote, “With respect to single family, the stair step recovery continues but oh man is there still a ways to go. Starts would have to rise by 33% just to get back to the 30 year average and they remain 57% below the peak in January ’06.”
Boockvar also believes the trend is being driven by high rent, which is causing Americans to seek buying as a way to save money. “Low vacancy rates and the rent inflation seen above will continue to drive this construction,” he wrote.
E-Commerce Sales
A recent report showing strong retail sales despite weak revenue results from department stores indicates that Americans are still shopping, but they are choosing different channels to purchase goods. A new study by the Department of Commerce confirms that, as e-commerce sales were seen 3.7% higher on a quarter-over-quarter basis in the first three months of 2016.
This jump is in spite of seasonal weakness, in which retail sales fall in January through March from end of year holiday shopping.
E-commerce still represents a small percentage of total shopping, however. While rising from less than 3% of total spending in 2006, e-commerce has risen only to 7.8% of total retail sales.
Inflation Rising
Strong retail spending, both on the internet and in non-department store retail shops, is helping the Consumer Price Index (CPI) rise above expectations. In April, the CPI jumped 0.4%, above 0.3% expectations and 0.1% in March.
The Bureau of Labor Statistics (BLS) concluded that the increase was being seen throughout the economy and was impacting goods and services of all types. “The seasonally adjusted all items increase was broad-based, with the indexes for food, energy, and all items less food and energy all rising in April,” the BLS said in a press release.
The CPI jump is significantly higher than any change in the past year, indicating that inflation is going up and that the Federal Reserve may be positioned to combat it with an increase to its interest rate target, as regional Fed presidents have been suggesting in several interviews and public speeches.
