Retail Sales Stagnate and Housing Starts Decline in June

​Last week, reports from the Commerce Department and the National Association of Home Builders indicated the housing market is beginning to cool off. Also, the Department of Commerce released their U.S. retail sales report for the month of June, showing a slight increase in retail activity. Finally, on Thursday, the Department of Labor announced that weekly jobless claims reached their lowest level since 1969.

• The Department of Commerce said in a report Monday that U.S. retail sales increased in June by 0.5% from the month prior and 6.6% from one year earlier. The report also revised data from the month before, raising May’s reading from 0.8% to 1.3%, the largest monthly increase since September 2017. Health and personal care spending, restaurant sales, and building and material stores reported increases of 2.2%, 1.8% and 0.8%, respectively. Department stores and clothing retailers experienced a decline of 1.8% and 2.5%, respectively, likely due to a booming e-commerce market. Tax cuts are encouraging businesses to expand, lifting job growth and, therefore, consumer spending. However, when controlling for the sales increases in volatile categories, such as auto dealers, gas stations, food services, and building material suppliers, spending was overall unchanged in June from a month prior. Unchanged spending after such large growth in May still signals robust demand.

• U.S. housing starts fell to 1.173 million during June, a nine-month low, as reported by the Commerce Department last Wednesday. The change is a 12.3% month-to-month decline, the measure’s largest drop since November 2016. According to The National Association of Home Builders (NAHB), home builder confidence for July was unchanged from June’s reading at 68 points. The NAHB calls that level “healthy.” However, builders are also facing the pressure of increasing construction materials costs, due to climbing commodity prices, a tight labor market, and rising trade tensions. Earlier in the year, the NAHB reported new tariffs would add $9,000 to the cost of each new home. “We’re seeing pressure on both sides of the market, from increasingly expensive inputs on the supply side to prices that are charging ahead of wage growth on the demand side, and the result is that neither builders nor buyers can keep up,” said John Pataky, executive vice president at TIAA Bank in Jacksonville.
  

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• The number of individuals filing for unemployment benefits fell to its lowest level since December 1969, the Labor Department said Thursday. The report indicates that in such a strong labor market, few Americans are being laid off and seeking assistance. For the week ended July 14, initial claims for state unemployment benefits fell 8,000 to a seasonally adjusted 207,000. Typically, a level below 300,000 is consistent with a healthy labor market. However, the jobless claims measure may be distorted because of difficulties making seasonal adjustments this time of year, mainly due to auto makers’ annual factory retooling shutdowns.