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Industrial production rose +0.6% in August, recovering from an upwardly revised -0.1% drop the previous month. Mining gained +1.4% in August, reversing a -1.5% drop in July that was affected by suppressed oil extraction as a result of Hurricane Barry. Manufacturing rose +0.5%, with higher gains for plastics and rubber products (+2.6%), machinery (+1.6%), and primary metals (+1.3%), and drops for apparel (-1.2), automobiles (-1.0%), and paper (-0.7%). On a yearly basis, nondurable goods manufacturing was down -1.4%, with losses in all components, ranging from -10.6% for apparel to -0.4% for both food and plastics/rubber, while durable goods manufacturing was a mixed bag, dropping -0.4% for the year with the highest gains for computers (+4.4%) and aerospace equipment (+1.8%) and largest drops for machinery (-2.0%) and wood products and primary metals (both down -1.1% Y/Y).
The Federal Reserve Open Market Committee (FOMC) voted 7 – 3 to lower the federal funds rate by 0.25% to a range from 1-3/4% to 2%, with one of the dissenting votes preferring a 0.50% drop and the other two preferring to leave the rate unchanged. The report noted that household spending “has been rising at a strong pace”, but business fixed investment and exports have been weakening. The FOMC also issued an update to their economic projections which were relatively unchanged from their last projections in June with the exception of forecasting one additional 0.25% rate cut in 2019.
Housing showed strength in August for both new residential construction and sales of existing homes. New residential housing starts grew +12.3% (+6.6% Y/Y) to a seasonally adjusted annual rate (SAAR) of 1.364 million units, and the highest level since June 2007. Construction of multiple unit dwellings grew by +100,000 units to a 424,000 SAAR (+13.7% Y/Y), with single family construction increasing +39,000 units to a 919,000 SAAR (+3.4% Y/Y), and completions of new homes growing +2.4% (+5.0% Y/Y). The National Association of Realtors report on Existing-Home sales showed a +1.3% increase for the second consecutive month of growth and an increase of +2.6% Y/Y. Existing home prices grew +4.7% Y/Y to a median of $278,200, and the report noted that current interest rates were drawing more buyers into the market but low inventory was pushing prices up and advised that homebuilders needed to increase construction to avoid home prices increasing at a faster pace than incomes.
Thursday September 26 – GDP Final Estimate, 2019 Q2
Friday September 27 – Durable Goods Orders
