Strategy in TECH...
For the last couple of months, I’ve reported that residential construction – commonly known as housing starts (as in starting construction) – have returned mixed results, suggesting the housing industry recovery was potentially stalling. Now, in new data from the U.S. Department of Commerce, we see that housing construction began a more durable return to growth.
On Tuesday, the U.S. Department of Commerce released their latest report on residential construction for the month of September 2020. Like last month, the results on housing starts were mixed, with both good news for custom integrators and bad news for the overall industry – suggesting again that housing growth, while robust, is beginning to moderate.
It has been quite the roller coaster ride for housing – first dropping a COVID-driven, eye-popping 30.2% in April to just a 934,000 unit seasonally adjusted annual rate. Then gradually rebounding in May and June…leading to a record 22.6% increase in July.
Now we see a bit of a pause in August, with overall housing starts declining 5.1% to a rate of 1,416,000 units, down from the revised rate of 1,492,000 in July.
In a new and troubling sign that the economy is not yet out of the woods, government data showed that for the month of July, retail sales barely crept up 1.2% overall. But there was one bright spot in the government’s report – retail sales of electronics and appliances jumped an impressive 23%.
By almost any measure, the housing market is in a major rebound, with the U.S. Commerce Department reporting on Tuesday that residential construction starts jumped an impressive 22.6% in July. This is the largest jump in housing starts in almost four years, according to a report by Reuters.
In new economic data released by the government today, the real gross domestic product (GDP) for the second quarter of 2020 declined an astonishing 32.9%, the worst ever such reading in recorded history. This result follows a decline of 5% in the first quarter and demarks a deep and painful recession resulting from the impact of the COVID-19 pandemic engulfing the United States, and the world.
Two new economic reports from June covering the housing industry show promising results, with both residential construction (otherwise known as housing starts), and sales of newly constructed homes taking a nice bounce in June. This was welcome news after dramatic declines hit the housing market in early Spring.
But will it hold?
Last month, Strata-gee reported on a shocking 30+% drop in residential housing construction, with starts dropping an eye-popping 30.2% in April. That was ultimately revised to a decline of “only” 26.4%…still a massive one month decline. Now in May, we see starts attempting to rebound from those unprecedented drops.
I would hope that by now long time Strata-gee readers had already anticipated this day, and now it’s official that this day has come – the U.S. economy is in a recession. It really shouldn’t surprise anyone. However, I know that there are some I’ve spoken with who were expecting a “rubber ball” rebound where – almost magically – everything, including business levels, would bounce back to normal quickly. This seemed to be based more on wishful thinking, or just general optimism, rather than anything factually based.
I suspect some of those folks might be a little surprised to learn that the economy is sliding into recession.
Now completed, Strata-gee’s COVID-19 Impact on Tech II Survey is a follow-up study to Strata-gee’s original survey, COVID-19 Impact on Tech. If you haven’t read those original results yet, I would suggest you start there by clicking on this link as it will add context to the follow-up survey discussed here. And this time we learn that things have definitely changed in just five short weeks. In a nutshell, survey respondents report that the impact of COVID-19 this time around is much greater than in March.
