Housing Starts
This leading economic indicator tracks how many new single-family homes or buildings were constructed throughout the month. For the survey each house and each single apartment are counted as one housing start, (a building with 200 apartments would be counted as 200 housing starts). The figures include all private and publicly owned units, with the only exception being mobile homes, which are not counted.
The housing industry accounts for about 25% of investment spending and 5% of the overall economy. Sustained declines in housing starts slow the economy and can push it into a recession. Likewise, increases in housing activity triggers economic growth.
Building permit data is released at the same time as housing starts. Permit activity provides insight into housing and overall economic activity. It is so important that it is included in the index of leading economic indicators.
Housing activity is directly impacted by mortgage rates. Higher interest rates increase housing costs and reduce the number of qualified borrowers, thus, a decline in home sales and drop-off in starts. Conversely, lower interest rates increases housing affordability and spurs homes sales and housing starts. Housing data also can have a significant impact on the bond market.
Personal Income
Personal income measures income from all sources. The largest component of total income is wages and salaries, a figure, which can be estimated using payrolls and earnings data from the employment report. Beyond that, there are many other categories of income, including rental income, government subsidy payments, interest income, and dividend income. Personal income is a decent indicator of future consumer demand, but it is not perfect. Recessions usually occur when consumers stop spending, which then drives down income growth. Looking solely at income growth, one may therefore miss the turning point when consumers stop spending.
References
"Economic Indicators - Housing Starts." Investopedia.com. 2005. Investopedia.com. 11 July
2005 .
"Overview of Hawaii's Economy." www.state.hi.us. www.state.hi.us. 11 July 2005
.
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