US housing starts rise in May, even as sector comes off the boil

Housing starts rose last month but by less than anticipated, alongside a continued decline in permits for new construction, pointing to a residential market that was coming off the boil.

According to the Department of Commerce, housing starts increased at a month-on-month pace of 3.6% to reach an annualised rate of 1.572m (consensus: 1.65m).

Building permits meanwhile dropped by 3.0% on the month to an annualised rate of 1.681m (consensus: 1.73m).

Most importantly, as Ian Shepherdson, chief economist at Pantheon Macroeconomics, pointed out, over the three months to May, single-family permits dropped at an annualised rate of 17.8%, while single-family starts declined at a clip of 12.9%.

"The monthly numbers are noisy, especially for starts, but the trends are clear," Shepherdson said.

"We think construction has some way further to fall, though the shortage of inventory means that activity will remain higher than implied by the mortgage applications data for some time yet."