US housing starts surge 22.6% in July despite wreckage
Confounding economists’ expectations, US private housing starts in July surged 22.6% on the previous month, and ended up 23.4% higher than the count for July 2019, according to figures published yesterday by the US Census Bureau and Department of Commerce.
Analysts say that despite the coronavirus pandemic, the market is buoyed by low interest rates and a shift to the suburbs.
“US housing starts blew the roof off of expectations in July … these are the kind of gains seen after storms/hurricanes,” wrote Jennifer Lee, senior economist at BMO Capital Markets, in a research note seen by ABC News.
Private housing completions in July were up marginally at a seasonally adjusted annual rate of 1.28 million, 3.6% above the figure for the previous month and 1.7% up on July 2019.
Writing earlier this month, Dietz called the surge in for-sale housing “exceptional” given the damage the coronavirus pandemic has done to the US economy, with new jobless claims reaching 1.4 million in July, and a second-quarter GDP shrinkage of -33%, the worst on record since the Second World War.
The surge in house building has a downside, however – lumber prices have jumped more than 110% since mid-April, adding around $14,000 to the cost of a new single-family home, the NAHB calculates.
Spain’s Q2 construction output down 30%
Spanish construction restarted on 13 April after a strict lockdown to contain the coronavirus, but data released by the Spanish statistical office show a steep fall of 29.9% in output in the second quarter (Q2) of this year compared to Q2 2019.
Responding to the release, analytics company GlobalData predicted that industry output for the whole of 2020 would contract by 10.4% relative to last year.
In late May the number of daily new cases in Spain fell from April peaks of more than 7,000 to several hundreds, where it stayed throughout June and the first half of July.
However, the number has risen sharply in recent days, with 2,953 new cases reported yesterday, in an intensification of the new trend. That figure includes cumulative new cases detected by antibody tests.
“GlobalData forecasts that construction output will contract by 10.4% in Spain in 2020, with the steep contraction in Q2 2020 being partially offset by the general improvement in economic conditions coupled with the easing of the lockdown measures in the second half of the year,” said GlobalData economist Moustafa Ali.
Vietnam’s new PPP law will boost infrastructure
A new law on public-private partnerships (PPPs) in Vietnam will boost infrastructure development there, says analyst Fitch Solutions Country Risk & Industry Research.
The National Assembly approved it on 18 June, making it the main, unified piece of legislation governing PPP transactions.
“We will be monitoring and assessing the progress of PPP transactions under the new PPP law, and make adjustments to our forecasts if necessary,” Fitch said.
The law makes projects in transport, grid infrastructure and power plants, water management, IT infrastructure, schools and hospitals eligible for PPP deals.
Fitch said road projects would be a litmus test for the effectiveness of the new law.
It believes there are 98 major infrastructure projects in planning earmarked as PPPs, of which 58 are roads and bridges, with an estimated value of $20.8bn.
At first, the government tried procuring parts of the project as PPPs, but switched to traditional public funding owing to bidding complications.
Sharp decline predicted for construction in MENA region
Economic analyst GlobalData has predicted that construction output in the Middle East and North Africa will fall by 2.4% as a result of the coronavirus, reduced oil production and shrinking non-oil sectors.
However, countries will be affected differently, and one – Egypt – is set to experience rapid growth despite the pandemic.
She added that the region was likely to make a slow and uneven recovery next year, hampered by a slowdown in public investment owing to the decline in hydrocarbon revenue.
The lack of government spending means that infrastructure projects will face delays, and tax increases may reduce demand in the commercial and residential sectors. Â
Another rating agency, Moody’s, said at the time that it expected government revenue to drop around 33% in 2020 and about 25% in 2021, relative to 2019.
The smaller Gulf petro-economies are facing sharper contractions, with the UAE’s construction output falling 2.1%, Oman’s 3.4%, Kuwait’s 7.8% and Qatar’s 8.1%.
Opec+, consisting of the Opec members and non-members such as Russia, agreed in April to cut supply by almost 10 million barrels a day, about 10% of global production.
Since then, the Opec basket price per barrel rose from around $12 to $37 at the end of June.
By contrast with the Gulf states, Egypt’s construction sector is set to continue growing despite the poor performance of the non-oil sector in April. GlobalData expects construction to grow at 7.7% in 2020, compared with 9.5% in 2019.