Summary for Week Ending Oct 19th

The US economic data clearly improved last week. This was the third week in a row with mostly better than expected data, and suggests some recent pickup in economic activity.

The week started off with a strong retail sales report for September. Although some of the increase in sales was related to higher gasoline prices, sales excluding gasoline picked up too.

And once again the housing reports showed significant improvement. Housing starts were up sharply (as were permits), and residential investment is now a fairly strong tailwind for the economy (I expect this to continue in 2013 and beyond). On Friday, existing home sales disappointed a few people, but the underlying details were solid. For some analysis, see: Existing Home Sales: A few comments and NSA Sales Graph

There was even a little improvement in the regional manufacturing reports (these have been showing contraction for months). The Empire State report still showed contraction in October, but at a slower pace than in September, and the Philly Fed report showed expansion for the first time since April.

One negative report was for initial weekly unemployment claims. Claims were down significantly in the prior week, and increased sharply last week. The large swings over the last two weeks were related to timing and technical factors, and are a reminder to use the 4-week average. On a 4-week average basis, unemployment claims are still elevated, but near the cycle low.

Here is a summary of last week in graphs:

' Housing Starts increased sharply to 872 thousand SAAR in September

Click on graph for larger image.

The first graph shows single family and total housing starts.

Total housing starts were at 872 thousand (SAAR) in September, up 15.0% from the revised August rate of 758 thousand (SAAR). Note that August was revised up from 750 thousand.

Single-family starts increased 11.0 to 603 thousand in September.

This was way above expectations of 765 thousand starts in September. This was partially because of the volatile multi-family sector, but single family starts were up sharply too - and above 600 thousand SAAR for the first time since 2008. Right now starts are on pace to be up about 25% from 2011.