Economic Watch: Concerns Remain Despite Housing Rebound

Housing starts in the U.S. bounced back, according to a new Commerce Department report, but concerns remain about the future of the housing market as well as the wider economy.

Nationwide housing starts rose 8.3% in June from the month before to a seasonally adjusted annual rate of 1.22 million units, the highest level since February and better than a consensus estimate from analysts.

Single-family production, the overwhelming majority of the market, increased 6.3% to a seasonally adjusted annual rate of 849,000 units, while multifamily starts rose 13.3% to 366,000. Single-family production was at its second-highest rate this year.

“We are encouraged by the June production report, but our builders continue to express concerns about lot and labor shortages, and building materials price increases,” said Granger MacDonald, chairman of the National Association of Home Builders (NAHB).

Overall permit issuance in June was up 7.4% to a seasonally adjusted annual rate of 1.25 million units. Single-family permits increased 4.1 percent to 811,000 units while multifamily permits jumped 13.9% to 443,000.

“We are seeing housing production return to trend after a softer reading last month,” said NAHB Chief Economist Robert Dietz. “The gradual growth in single-family starts in 2017 is in line with our forecast, and we should see this sector continue to strengthen throughout the year as consumers show interest in the housing market.”

However, not everyone is convinced about how solid the housing market is following the release on Tuesday of the NAHB Housing Market Index, which fell from 66 to 64 in July, an eight-month low.

This suggests a bit of a contradiction between the two latest reports, according to Lindsey Piegza, chief economist at Stifel Fixed Incomes, because as builders continue to break ground on new projects, builder confidence appears to be waning.

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Increased Truck Orders Push Volvo Profit Higher

The parent company of Volvo Trucks and Mack Trucks on July 19 reported both increased sales and profitability during the second quarter of the year.

Sweden's Volvo AB said net profit for the period was 6 billion kronor ($725 million), up from 1.9 billion kronor a year earlier, according to AP, and in line with analysts' expectations. Profit a year earlier was hit due to a 2.3 billion kronor payment the company made due to a European Union completion investigation.

Sales increased 12% to 88.4 billion kronor as its net order intake for trucks increased to 55.265 from 45,422 a year earlier. Despite this total, truck deliveries during the quarter fell by 1% due to the North American market, according to the company.

“Recent trends on the truck markets continue with good demand in Europe, including a distinct recovery in Russia, and a gradual improvement in North and South America, with increased order intake,” said Martin Lundstedt, president and CEO.

Volvo said that in North America, the on-highway truck segment is still characterized by over-capacity due to the underutilized population of used long-haul trucks, however, regional distribution is showing signs of higher activity.

In North America, truck deliveries were down 11% for the company during the quarter. Volvo Trucks' market share came in lower at 8.8% while Mack gained market share, reaching 8.2%.

The order intake increase of 30% was driven by both Mack and Volvo reflecting the higher activity within the construction segment and a somewhat improved freight environment, according to the company.

Volvo raised its total North American market forecast for retail sales volume modestly to 225,000 trucks 2017, up from its previous projection of 215,000.

The company is the first truck maker to release earnings for the second quarter, with Daimler and Paccar set to unveil their figures next week.

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