Mostly Disappointing Economic News ...

Housing starts, initial jobless claims, and the Philadelphia Fed survey figures were disappointing while building permits came in above expectations.  The S&P 500 remains hopeful as it is pretty much unchanged even after bad economic news.

Initial Jobless Claims

Latest seasonally adjusted initial jobless claims of 366K were slightly above the 365K consensus.  Not surprisingly, an upward revision was yet again applied to the previous week's number; 364K from 361K.  YTD, there have been maybe only one or two weeks where jobless claims were not revised higher. 

Housing Starts & Building Permits

Housing starts annualized rate of 746K was significantly below the 763K expectation; down 1.1% sequentially, but up 21.5% Y/Y. 

• Housing starts for single-unit homes were down 6.5% from June; up 17% from last year.
• MDUs (multi-dwelling units) did well as usual, up 9.6% and 30.1% m/m and Y/Y, respectively.
• Total starts were up Y/Y in most regions with the West leading the way, up 48.1% Y/Y.  The Northeast disappointed with housing starts down 10.5% from last year.  Sequentially, the Midwest was the only region with an increase; up 17.0%.  The West also led the way, this time down 5.3% m/m, more than the other regions.

• Annualized building permits of 812K were above the 770K expectation; up 6.8% and 29.5% m/m and Y/Y, respectively.
• Permits for single-unit homes were up 4.5% from the previous month and up 23.0% from last year.
• MDU permits for 5+ unit homes were up 10.5% m/m and 47.3% Y/Y.  For the 2 - 4 unit homes, building permits were up only 4.2%.  It appears that the trend of building large MDUs will continue during the next six months, which we believe is not good news for the housing market.  Continuing increase in MDUs may not allow inventories to get low enough to push rental rates even higher in order to convince renters to buy.  This is not good for the overall housing market. 
• Regionally, permits declined from the previous month only in the Midwest; down 4.2%.  Hand outs of permits continued to increase in the West; up 14% from June.  Compared to last year, building permits were up in every region, with the West, again, leading the way, up 53.8%.

Philadelphia Fed Business Outlook Survey

Philly Fed's survey for August came in at -7.1, below the -5.0 consensus.  Although this is slightly better than July's -12.9, it shows continuing deceleration of growth and possibly contraction within manufacturing.

• New orders remained in negative territory, -5.5, a slight improvement from July's -6.9.
• Shipments and unfilled orders sub-indexes continued to be disappointing.
• Unlike what we saw in the Empire survey yesterday, the 0.6 improvement in inventories (-6.9 from -7.5) do not necessarily indicate significant inventory replenishment coming up the next couple of months.
• The employment sub-index declined further, down 0.2 to -8.6.  There was slight improvement in average workweek, up 2.7 but remaining significantly below zero at -14.6.
• The forward looking index was down 6.8 from July at 12.5.  Most important sub-indexes were also lower from July, indicating that businesses are not as optimistic as they were earlier this year. 

We have had more bad news than good news, but yet not terrible news.  However, the market continues to wait for the Fed to announce something, maybe another 'psychological' QE, at its meeting in Jackson Hole, WY.  The market is pretty much flat.  Many continue to have faith in home builders as the XHB ETF is up 0.2%.  FB is down nearly 7% and trading below $20/sh.  GRPN is down approx. 6% and trading below $5/sh.  We are still waiting for that stock to create a support level.  It appears it is not happening anytime soon, and certainly not within the $5 - $6 range.