Aug 15 (Reuters) – U.S. single-family homebuilders’
confidence and New York state factory activity fell in August to
their lowest levels since near the start of the COVID pandemic,
a further sign the economy is softening as the Federal Reserve
raises interest rates.
The National Association of Home Builders/Wells Fargo
Housing Market Index fell 6 points to 49 this month, the eighth
consecutive monthly decline and the lowest reading outside of
the pandemic era since 2014, a survey released on Monday showed.
A reading under 50 indicates that more builders view conditions
as poor than good.
According to the NAHB, rising construction costs and high
mortgage rates weighed on sentiment. The Fed’s increasingly
aggressive fight to quash high inflation by lifting borrowing
costs has already begun to be felt in the housing sector, which
is highly sensitive to interest rates.
The current sales of single-family homes component fell to
57 from 64 and the gauge of single-family sales expectations for
the next six months fell to 47 from 49, while the prospective
buyer traffic index declined to 32 from 37.
Meanwhile, a separate survey by the New York Fed showed the
“Empire State” index on current business conditions plummeted
42.4 points to a reading of -31.3 this month. A reading below
zero signals a contraction in the New York manufacturing sector.
Manufacturers reported a sharp decline in orders and
shipments. The survey’s new orders index tumbled 36 points to a
reading of -29.6 while the shipments index plummeted 49.4 points
to -24.1.
The activity decline in the Aug. 2-9 survey also is seen as
reflecting the impact of the Fed’s actions, which have caused
financial market conditions to tighten.
The U.S. central bank has raised its benchmark overnight
interest rate by 225 basis points since March and is expected to
raise its policy rate by another 50 or 75 basis points at its
next meeting on Sept. 20-21.
The Fed is aiming to dampen demand across the economy enough
to cool inflation, which is running at a four-decade high,
without sparking a sharp rise in unemployment. The effort,
however, has fueled fears of a recession.
Fed policymakers have underscored that the central bank will
need global supply chains to untangle somewhat in order to help
bring down inflation. On that front, some parts of the New York
state manufacturing survey were encouraging.
The prices paid index moved to its lowest level since
February 2021, unfilled orders also fell and the delivery times
index declined for the first time since May 2020.
“This suggests that supply chain issues have eased
noticeably, although this likely at least in part reflects
weakening in demand,” said Daniel Silver, an economist at J.P.
Morgan.
(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)
