The latest housing statistics, released yesterday by the Commerce Department, suggested that the months ahead would be equally bleak. The number of building permits issued in October fell for the ninth straight month, dipping to the lowest rate since 1997.
The report deepened concerns that the slowdown in the housing market could brake economic growth more than analysts have anticipated.
The number of new homes that builders started in October was down 14.6 percent from September, at seasonally adjusted annual rates, to 1.49 million. The number of building permits issued fell 6.3 percent, to 1.54 million.
James Hamilton has more. I don't think this is over. All eyes will be on next month's data to see if this rate of decline holds up. By itself, this does not necessarily mean a recession, but it does shift the balance of risks. Combined with yesterday's CPI news which were lower than what most were hoping, but not outside the range I had in my head, this is enough to get me to raise my probability of a Fed rate cut in early 2007 by a little bit. Earlier this week, I would have said that a rate cut in the first 3 months of 2007 had about a 1 in 4 probability. Today I'd go up to 1 in 3.
The charts at the Cleveland Fed show a small rise in the probability of a cut in January as well as a perceptible rise in the probability that the rate in March will be 4.75%. Chew on that over the weekend.
Source: Cleveland Fed
hmmm. The possibility of both rising inflation rates and a slowdown in growth. What do you recommend the Fed do?