In a surprise result, housing starts in the US jumped 14.6% from a month earlier, putting it at a seasonally adjusted rate of 596,000. That was the best reading since September.
The news is an indication of life for the battered housing markets. The gains were led by a 77.7% gain in multifmaily constructions. Single-family homes, which make up 70% of all starts, fell by 1.0% from a month earlier.
New home construction help add jobs to the construction sector, a sector of the labor market that has been hard hit by the housing market's recession. New starts have been low due to weak demand from buyers. Prices for previously owned homes are cheap because they are competing with foreclosed properties.
New home sales were down 7.6% in December from a year earlier, though they did pick up slightly in monthly terms in December.
As we can see from these charts of housing starts and new home sales, the US housing sector is still gropping along the bottom following the Great Recession.
The US economy however, has been strengthening despite the woes in the housing market, with GDP picking up to a 3.2% annualized rate in the 4th quarter, from 2.6% in the 3rd quarter.
USD Strengthens Following Report
The better than expected result to day helped the USD gain against its major rivals.
We already had a strong shift of momentum coming into the US session with the EUR/USD stalling out an overnight rally at 1.3570. Following the housing report, we fell to 1.3461.
The GBP/USD extended its losses down to 1.60. We have more on the Pound in today's Fundamental Update: GBP Slides Following BoE Inflation Report; King Tries to Toning Down Expectations
The USD/JPY broke through our high for this week, reaching just below the 84.00 level prior to the release of industrial production data from the US. That's our highest level since December 20th.
US Industrial Production Data Disappoints
However, at 9:15 AM, about 45 minutes after the release of the housing data, we did have industrial production data showing output declining in January, a surprise as forecasts had called for a 0.5% increase. Countering the weak headline number, December's production was revised upward to a gain of 1.2% from 0.8%.
Let's see if this undoes some of the shine for the USD following the housing report.