US housing starts drop more than expected in August

US housing starts fell more than expected in August following two consecutive months of increases, according to data released by the Commerce Department.

Housing starts declined 5.8% from July’s revised 1.21m to 1.14m, missing expectations for a smaller drop to 1.19m. Starts were up 0.9% from the same month a year ago.

Housing starts in the South fell 14.8% to 543,000, which was the biggest drop since October, with the Northeast, Midwest and West all showing an increase.

Meanwhile, starts for single-family homes fell 6% to 722,000 from the revised July figure.

Permits for new construction, which are a closely-followed gauge of future demand, were down 0.4% to 1.14m.

Pantheon Macroeconomics said: “Presumably, at least part of the drop in the south reflects the impact of flooding in Louisiana. The headline story is similar in the permits numbers, with the south down 20K but increases everywhere else, totalling 13K.

“Note, though, that all the net dip in permits was in the volatile multi-family component, while single-family permits rose by 26K. They remain below their cycle peak, so with new home sales rising and homebuilder sentiment up sharply in the September NAHB survey, we expect both starts and permits to increase markedly over the next few months.”