Important Economic Signals from Housing Starts Data

Jan. 15, 2013
The tentative cyclical high in housing starts provides further confirmation of a slowdown in the US economy’s rate of growth in the latter half of 2013.

Regular followers of ITR Economics™ know the importance of leading indicators.  We use a variety of leading indicators from many sources, using different methodologies from varying perspectives.  One of these is the Housing Starts 12/12 rate-of-change (please go to our website if you are not familiar with that term, but essentially it is a year-over-year comparison of the annual data trend).  The Housing Starts 12/12 established a tentative high in October 2012.  We have been telling audiences to expect a near-term high, and it has happened.

The tentative high is important for two reasons. One, it means that we are on track with our forecast of at least a slowdown in the US economy’s rate of growth in the latter half of 2013.  The Housing Starts 12/12 leads Retail Sales and US Industrial Production through business cycle highs by seven and eight months, respectively.  Expect both general consumption and production to slow noticeably in the latter half of this year.

The second reason applies to all readers who have had a Trendcast done on their own data.  Be sure to apply the median timing estimate off the tentative October 2012 Housing Starts high as you plot when your own business cycle will shift from positive (Phase B) to slower growth (Phase C).

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