U.S. homebuilding fell for a second straight month in August as a rebound in the construction of single-family houses was offset by persistent weakness in the volatile multifamily home segment.
The report from the Commerce Department on Tuesday also showed building permits racing to a seven-month high in August. However, permits for single-family homebuilding, which accounts for the largest share of the housing market, dropped.
The mixed report suggested housing could remain a drag on economic growth in the third quarter. Homebuilding has been treading water for much of this year amid shortages of land and skilled labor as well as rising costs of building materials.
Housing starts slipped 0.8 percent to a seasonally adjusted annual rate of 1.18 million units, the Commerce Department said.
Building permits surged 5.7 percent to a rate of 1.30 million units in August, the highest level since January.
The data suggested limited impact on permits from Hurricane Harvey, which lashed Texas in late August and caused unprecedented flooding in Houston. The Commerce Department said the response rate from areas affected by the storm “was not significantly lower.”
But homebuilding could slump further in September in the aftermath of Harvey and Hurricane Irma, which struck Florida. According to Census Bureau data, the areas in Texas and Florida that were devastated by the storms accounted for about 13 percent of permits issued in the nation last year.
Though activity could pick up as the hurricane-ravaged communities rebuild, the dearth of labor could curb the pace of increase in homebuilding. A survey Monday showed confidence among homebuilders fell in September amid concerns that the hurricanes could worsen the labor shortages and make building materials more expensive.
Economists had forecast housing starts rising to a 1.18 million-unit pace last month. Investment in homebuilding contracted in the second quarter at its steepest pace in nearly seven years. As a result, housing subtracted 0.26 percentage point from second-quarter gross domestic product.
Homebuilding rose 1.4 percent in August on a year-on-year basis. Despite the recent weakness, housing continues to be supported by a labor market that is near full employment. In addition, mortgage rates remain close to historic lows.
Single-family homebuilding jumped 1.6 percent to a rate of 851,000 units in August. Single-family permits, however, fell 1.5 percent to a 800,000-unit pace. With permits lagging starts, single-family homebuilding could decline in the months ahead. Groundbreaking on single-family housing projects has slowed since vaulting to near a 9-1/2-year high in February.
MIXED DATA Last month, single-family starts rose in the South and West, but fell in the Midwest and Northeast. Starts for the volatile multi-family housing segment tumbled 6.5 percent to a rate of 329,000 units. Multi-family permits vaulted 19.6 percent to a 500,000-unit pace in August.
The mixed data is unlikely to change expectations that the Federal Reserve will announce on Wednesday a plan to start unwinding its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities. Fed officials were scheduled to start a two-day meeting later on Tuesday.
The dollar was trading lower against basket of currencies, while prices for U.S. Treasuries rose. U.S. stock futures were slightly higher.
In a separate report on Tuesday, the Labor Department said import prices jumped 0.6 percent in August, the biggest gain since January, after dipping 0.1 percent in July.
In the 12 months through August, import prices surged 2.1 percent after rising 1.2 percent in July.
Last month, prices for imported petroleum raced 4.8 percent after slipping 0.4 percent in July. Import prices excluding petroleum rose 0.3 percent after dipping 0.1 percent the prior month. Import prices excluding petroleum increased 1.0 percent in the 12 months through August.
Import prices outside petroleum are rising as the dollar’s rally fades. The dollar has weakened 8.3 percent against the currencies of the United States’ main trading partners this year.
The report also showed export prices rose 0.6 percent in August after gaining 0.5 percent in July. They increased 2.3 percent year-on-year after rising 0.9 percent in August.
A third report from the Commerce Department showed the current account deficit, which measures the flow of goods, services, and investments into and out of the country, increased to $123.1 billion in the second quarter from $113.5 billion in the first quarter.
That was the highest level since the fourth quarter of 2008.