Menu Close

Industrial production and housing rebound in July, affirming GDP growth outlook

REAL ECONOMY BLOG | August 16, 2023

Authored by RSM US LLP

Industrial production, housing starts and permits in July have set the tone for a robust third quarter, as GDP growth is expected to be stronger than the long-run level of 1.8%.

Industrial production rose 1% on the month, while housing starts and permits rose 3.9% and 0.1%, respectively, according to data released by various government agencies Wednesday.

The significant 5.2% uptick in vehicle production led the increase in total industrial production level in July. A warmer-than-normal July also drove demand for utilities, as electricity rose 6.7% from a month ago.

The increase in industrial production was broad-based except for natural gas, which saw a drop of 2% on the month.

That said, the strong increase in industrial production in July came after a downward revision to June’s print from a decline of 0.5% to 0.8%. Thus, the index remained below April’s high.

A line and bar graph depicting monthly industrial production volume in the United States over the past two years.

The housing market continued to show a significant shift of demand from existing homes to newly built ones due to elevated mortgage rates. As a result, builders have ramped up construction of new homes, keeping July’s number above forecasts.

There were 1.45 million housing starts in July, a sizable increase compared to the 1.34 million at the start of the year. Still, housing supply remained under our long-run equilibrium of 1.7 million new homes for the next five years.

Most of the increase came from single-family homes, which were up 9.5%, while multifamily homes dropped 0.8%.

While it is likely that the housing market bottom is behind us, we expect a bumpy road ahead for the sector as interest rates will stay unchanged until at least the first quarter of 2024.

This line and bar graph depicts the totals of housing starts and new construction permits over the last 20 years in the United States.

The takeaway

Wednesday’s data reaffirmed our call for strong third-quarter economic growth, not only fueled by low inflation but also robust spending and output performances.

However, it remains to be seen if such economic strength can continue past Labor Day, when a host of headwinds, such as tighter credit standards, lower savings levels and the lag impact of elevated interest rates, begin to show full impacts.

Do you have questions or want to talk to a LaPorte professional?

Fill out the form below and we’ll contact you to discuss your situation.

  • Should be Empty:
  • Topic Name:

This article was written by Tuan Nguyen and originally appeared on 2023-08-16.
2022 RSM US LLP. All rights reserved.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

LaPorte CPAs & Business Advisors is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how LaPorte CPAs & Business Advisors can assist you, please call 713.548.2034.