The Weekly Briefing - February 22nd, 2021

The Weekly Briefing – February 22nd, 2021

In This Week’s Brief:

  • Multifamily Construction Notches Gains, While Single-Family Starts Remain Elevated
  • Retail Sales Impress with Biggest Increases in Several Months
  • Improvements in Aggregate Household Financial Metrics Mask Continued Distress

Multifamily Construction Notches Gains, While Single-Family Starts Remain Elevated

Multifamily housing construction picked up added momentum last month after seeing somewhat subdued activity for much of 2020. Multifamily starts, which include buildings with five or more units, jumped 17.1% during January to 418,000 units nationwide. And multifamily permits spiked 28.0% to the highest level in five years, suggesting a likely faster pace of construction this spring.

Meanwhile, single-family housing construction continues at an elevated pace despite starts slowing 12.2% last month. Homebuilders recorded 1.2 million annualized starts during January, compared to an average of 893,000 starts per month during 2019. Single-family permits also rose last month by 3.8% as home builder sentiment remains near historic highs.

The robust pace of residential construction could put continued upward pressure on lumber costs that have risen drastically over the past year, which is translating into higher new-home prices and impacting commercial real estate construction. The National Association of Home Builders says lumber costs have caused new-home prices to rise more than $24,000 since April 2020.

Annual Monthly Single-Family and Multifamily Housing Starts

Retail Sales Impress with Biggest Increases in Several Months

Retail sales and food services spending climbed 5.3% last month, the fastest pace since mid-2020 and a reversal after three months of modest declines. Sales at restaurants, stores, and online totaled $568.2 billion during January, marking a 7.4% YOY increase.

The jump in retail sales was broad-based as every major category experienced an uptick in activity, but discretionary sectors led the way. Furniture merchandisers, electronics stores, and online retailers each saw sales increase at a double-digit clip. Despite slowing somewhat during 4Q20, internet shopping continues to maintain an elevated pace compared to pre-pandemic trends.

The second round of stimulus payments likely contributed to last month’s jump in retail sales. Real-time data provided by Opportunity Insights indicates consumer spending, a broader measure of consumer activity than retail sales, spiked in early January when the stimulus checks were dispersed.

Further, the same dataset shows that the largest spending increases last month occurred in low-income neighborhoods to 10% to 20% above January 2020 levels. Spending in middle- and low-income zip codes also jumped but at a more modest pace.

Percentage Change in Consumer Spending Relative to Jan. 2020 by Zip Code Income Level

Improvements in Aggregate Household Financial Metrics Mask Continued Distress

One paradox of the pandemic is that some measures of consumer financial health have improved in the face of elevated unemployment rates and continued labor market softness. These gains underscore the uneven impact of the downturn and the k-shaped nature of the recovery that has seen some economic sectors quickly rebound while others have languished.

Experian reports that the average consumer credit score climbed seven points last year compared to an average increase of one point per year during the last expansion. The average credit score now stands at 710, the highest level on record, while credit card delinquency rates have declined to a record low as of 3Q20. Consumer loan balances (mostly credit card debt) have also fallen to 13.4% below year-ago levels.

At the same time, nationwide savings account balances are up 15.4% YOY, suggesting many households have managed to grow their financial cushions over the past several months. And consumers continue to demonstrate caution, setting aside 13.7% of their disposable income as savings in December 2020, which is nearly double the pre-pandemic average.

Many of these financial gains could prove transitory, however, without additional fiscal stimulus and stronger labor market performance. The most rapid declines in credit card balances and gains in savings have coincided with stimulus check payments. And the end of forbearance programs rolled out by lenders at the start of the pandemic could push delinquency rates higher.

Consumer Loans & Total Savings Deposits


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