ICYMI: Bringing fears of a broader economic recession back into focus, U.S. homebuilding fell to the lowest level in nearly 18 months in July after being weighed down by higher mortgage rates and prices for construction materials
The housing market's declining fortunes brought fears of a broader economic recession back into focus. But with other data on Tuesday showing industrial production rising to an all-time high last month despite the high interest rate environment, the Federal Reserve is expected to stay on its aggressive monetary policy tightening path.
Starts for housing projects with five units or more declined 10.0% to a rate 514,000 units. Multi-family housing construction remains supported by strong demand for rental apartments, with rising borrowing costs pushing homeownership out of the reach of many Americans. The 30-year fixed-rate mortgage is hovering around an average of 5.22%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.
Stocks on Wall Street were trading mixed. The dollar was steady against a basket of currencies. U.S. Treasury prices fell.A house under construction is seen in Los Angeles, California, U.S., June 22, 2022. REUTERS/Lucy Nicholson/File PhotoWhile housing is struggling, another sector that is sensitive to interest rates is forging ahead for now.
But risks are rising, with retailers sitting on excess inventory, especially of apparel. A strong dollar as a result of tighter monetary policy could make U.S. exports more expensive. "Recessions are normally a loss of faith, and it would appear that manufacturers' sentiment is frayed," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "However, it's important to watch what manufacturers do rather than say. For now, manufacturers are not acting as if the economy is in or headed toward a recession."
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