Housing Starts and Fed Speak Overshadow Overseas Fears Recent economic data suggests that global economic optimism and fears may be shifting

Housing starts, an indicator of economic growth, in the United States surged to their highest level in more than 10 years during March 2018. This news marks a promising uptick in U.S. economic activity, despite some ongoing economic worries from abroad.

The increase in housing starts in March 2018 can be attributed mainly to a surge in production of single-family homes. Single-family home construction led the jump in housing starts, rising 6.5% to an annual rate of 872,000. This is the highest level since October 2007. Multi-family housing also saw notable increases, with construction starting on 543,000 units annually, an increase of 3.9%. This increase follows an 8.8% drop in housing starts in February 2018.

The rise in housing starts reflects confidence among builders, investors, and potential buyers in the later stages of the current business cycle. Many have been expecting an economic slowdown, but the housing market appears to be largely holding steady despite the recent stock market volatility. The housing market has been a major driver of economic growth over the past couple of years and it appears to be continuing that trend.

It seems clear that much of the current optimism is based on the Federal Reserve's decision to raise interest rates. The Fed’s decision indicates a positive outlook for the economy going forward. Higher interest rates can stimulate economic activity by encouraging businesses to borrow funds at lower rates. This can result in the increased production and investment needed for economic growth.

As encouraging as this news is, there are still some lingering long-term economic concerns. Most notably, economic worries abroad could still cause economic headwinds for the U.S. economy. For example, there is continued uncertainty about the Brexit negotiations in Europe, and rising tensions between the U.S. and China or Russia. Investors are especially worried about a trade war between the U.S. and China, as this could lead to substantially higher prices for consumers.

Despite these overseas concerns, it appears that the most recent data is providing a breath of fresh air to the U.S. economy. An increase in housing starts usually implies additional economic activity in other areas, such as construction, manufacturing, and services. This could mean more job opportunities, higher wages, and increased consumer spending, which could help propel the U.S. economy even further.

In conclusion, recent increases in housing starts and the Fed’s commitment to raising interest rates give cause for optimism despite economic worries from abroad. The growth in the housing market has been a major driver of economic growth in recent times, and this appears likely to continue. However, it’s important to keep an eye on overseas developments, as a trade war or other geopolitical tensions could disrupt economic progress.

This article analyzes the recent upturn in US economic activity in the form of increased housing starts, and the resulting optimism amongst investors and builders. The authors note that while this is encouraging news, it should be tempered by underlying overseas concerns. These include continued uncertainty about Brexit negotiations in Europe, and escalating tensions between the US and China or Russia in the form of a possible trade war.

The authors suggest that while these overseas worries should not be forgotten, they may not be enough to derail recent economic progress. The increase in housing starts is indicative of economic expansion in other areas like manufacturing and services, which makes way for increased job opportunities and higher consumer spending. The Federal Reserve’s decision to raise interest rates represents a vote of confidence in the US economy and further stimulates growth.

Overall, US economic activity appears to be holding steady despite underlying worries from abroad. Ultimately, it may be beneficial to keep a close eye on international events to ensure economic growth is sustained.

This article was contributed on Oct 23, 2023