American builders took out more residential construction permits in July than at any time in the past four years, a sign the market will continue to improve.
Applications, a proxy for future work, rose to an 812,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg and the most since August 2008, Commerce Department figures showed today in Washington. Housing starts fell 1.1 percent to a 746,000 rate from June’s 754,000, which was the strongest pace in more than three years.
Less costly properties combined with record-low mortgage rates are reviving demand, helping companies like PulteGroup Inc. (PHM) boost profits. Another report showed Americans this month were the most pessimistic on the economic outlook since late last year as fuel costs climb, a hurdle that may prevent the economy from strengthening in the second half of the year.
“Housing is one of the bright spots in the economy,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The recovery’s resilience will be tested over the next couple months because of Europe, the weakening in China, and also given that the consumer and business moods are rather gloomy right now.”
Stocks rose, sending the Standard & Poor’s 500 Index to its highest level since April, as the increase in building permits brightened the outlook for housing. The 500 Index climbed 0.7 percent to 1,415.51 at the 4 p.m. close in New York. The S&P Supercomposite Homebuilding Index advanced 4.4 percent.
Permits were projected to rise to a 769,000 pace, according to the median estimate of 52 economists surveyed by Bloomberg. Estimates ranged from 737,000 to 805,000.
Elsewhere today, U.K. retail sales unexpectedly rose in July as promotions helped to boost gasoline receipts and food purchases increased.
In China, foreign direct investment fell in July to the lowest level in two years, fueling concern that waning confidence in the nation’s growth prospects may restrain any economic rebound.
The share of U.S. households viewing the economy as heading in the wrong direction rose to 45 percent in August, the highest since November, from 36 percent the prior month, the Bloomberg Consumer Comfort survey showed today. The monthly expectations gauge dropped to minus 22 from minus 11 in July. The weekly Bloomberg Consumer Comfort Index fell to minus 44.4 in the period ended Aug. 12, lowest since January, from minus 41.9.
“The American public appears to have tired of running harder to stand still, expressing their displeasure with the current state of economic affairs in the country and their own personal finances,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
The report raises the risk that a pickup in retail sales last month will not be sustained after gasoline prices climbed by 38 cents a gallon in less than two months. A jobless rate that’s exceeded 8 percent for a post-World War II record 42 months is probably also contributing to concern that the world’s largest economy is failing to make enough progress.
Another report today signaled the job market is stabilizing after hiring improved last month. The number of Americans filing claims for jobless benefits was little changed last week, bringing the average over the past month to the lowest level since late March, Labor Department data showed.
Filings climbed by 2,000 to 366,000 in the week ended Aug. 11, in line with the median forecast of 45 economists surveyed by Bloomberg, which called for an increase to 365,000. The four- week moving average, a less volatile measure, dropped to 363,750, the fewest since the week ended March 31.
The housing report showed starts of single-family houses fell 6.5 percent in July to a 502,000 rate, the first decline since February. Work on multifamily homes, such as apartment buildings, rose 12 percent to an annual rate of 244,000, a five- month high.
Three of four regions showed a decline, led by a 5.3 percent decrease in the West. That area also showed the biggest jump in permits, climbing 14 percent in July, taking them to the highest level since June 2008. Construction applications in the West soared 54 percent over the past 12 months, the biggest year-to-year jump since December 1986.
Residential construction leaders are turning less pessimistic. The National Association of Home Builders/Wells Fargo index of builder confidence climbed in August to the highest level in more than five years, the Washington-based group said yesterday.
Low borrowing costs and cheaper homes are helping spur demand. The average rate on a 30-year fixed mortgage dropped to 3.49 percent in the week ended July 26, the lowest in records dating to 1971, according to McLean, Virginia-based Freddie Mac. The median price of a new house was down 3.2 percent in June from the same time last year, according to figures from the Commerce Department.
PulteGroup, the largest U.S. homebuilder by revenue, posted a better-than-estimated profit and a 32 percent jump in orders in the second quarter. The Bloomfield Hills, Michigan-based company is seeing the market improve, while it had entered 2012 assuming new home sales would be little-changed from 2011, Chairman and Chief Executive Officer Richard J. Dugas said.
“We have been pleasantly surprised as demand throughout the selling season and extending into these initial weeks of July has exceeded our expectations,” Dugas said on a July 26 conference call with analysts.
Still, “many of the macro drivers of demand really haven’t changed all that much,” he said, citing high unemployment, weak consumer sentiment and concern over Europe’s debt crisis and impending U.S. tax changes.
Some of those headwinds may be holding back producers. Manufacturing in the Philadelphia region contracted in August for a fourth consecutive month as orders and employment declined, another report today showed.
The Federal Reserve Bank of Philadelphia’s general economic index improved to minus 7.1 in August from minus 12.9 the previous month. Economists forecast the gauge would climb to minus 5, according to the median estimate in a Bloomberg survey. A reading of zero is the dividing point between contraction and expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
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