Future Signals For The Construction Sector

EPB Macro Research

The housing starts and building permits report is one of my favorite data points on the housing market and can also be one of the earliest leading indicators in the economy.

The trends in housing starts and building permits provide critical information into the construction sector of the economy. Declining trends in housing starts and building permits can foreshadow slowing employment and wage growth.

While both housing starts and building permits are reliable data points, I focus on building permits which are simply approvals to start a new construction project and not sensitive to weather conditions like an official housing start can be.

While I look at both metrics, for consistency, I tend to only report on permits each month.

US building permits increased to 1.294M units in May. While increasing month over month, building permits nationally are down 6% from their cyclical peak from March 2018.

building permits
US building permits increase to 1.294 million units on a seasonally adjusted annualized basis.

In year over year growth rate terms, national building permits dropped 0.54%. As with all data, we are focused on the rate of change in growth. While building permits growth ticked higher sequentially, the trending direction is clearly one of deceleration.

Building permits yy
US building permits year over year change (%).

The weakest category over the past several months has been the single-family component to the building permits index.


US Trends