Implications: After falling for three consecutive months, housing starts rebounded strongly in June, beating the consensus to post their largest monthly gain of the year. Even though both single-family and multi-unit starts were responsible for the gain in June's headline number, in the past year single-family starts are up 10.3% while multi-unit starts are down 12.9%. The "mix" of construction has been generally shifting toward single-family building and this is a good sign for the overall economy. When the housing recovery started, multi-family construction led the way. But the share of all housing starts that are multi-family appears to have peaked in 2015, when 35.7% of all starts were multi-family, the largest since the mid-1980s, when the last wave of Baby Boomers was growing up and moving to cities. In June, the multi-family share of starts was 30.1%. The shift toward single-family is a positive sign for the economy because, on average, each single-family home contributes to GDP about twice the amount of a multi-family unit. Based on population growth and "scrappage," housing starts should eventually rise to about 1.5 million units per year. In other words, much of the recovery in home building is still ahead of us. Another bright spot in today's report was that housing completions rose 5.2% in June and are now up 8.1% in the past year. Further, building permits for new structures posted their biggest one month jump since 2015 in June. Expect housing starts to continue to gain steam in the months ahead as more unfinished projects are completed and builders move onto new ones. In other recent housing news, the NAHB index, which measures sentiment among home builders fell to a still elevated 64 in July from 67 in June. Expect further strength in the housing sector in the year ahead as more jobs, faster wage growth, and, for at least the time being, optimism about more market-friendly policies from the Trump Administration, continue to encourage both prospective home buyers and builders. On the factory front, the Empire State index, a measure of manufacturing sentiment in New York, fell to a still healthy 9.8 in July from 19.8 in June. Finally, on inflation, import prices fell 0.2% in June but are up 1.5% from a year ago. Export prices also fell 0.2% in June, but have increased 0.6% in the past year. Both figures are a stark contrast to the negative direction of prices in the year ending in June 2016.
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