According to the National Association of Manufacturers’ (NAM) Monday Economic Report for this week, new residential construction activity dropped 14.4% from 1,810,000 units at the annual rate in April to 1,549,000 units in May. Single-family housing starts declined 9.2% from 1,157,000 units to 1,051,000 units, a 21-month low, and multifamily activity plummeted 23.7% from 653,000 units to 498,000 units. On a YoY basis, new housing starts have fallen 3.5%, with single-family construction activity down 5.3%. 


New housing permits—which are a proxy for future residential construction—fell 7.0% from an annualized 1,823,000 units in April to 1,695,000 units in May, an eight-month low. Single-family permits declined 5.5% from 1,109,000 units to 1,048,000 units, the weakest reading since July 2020. At the same time, multifamily activity decreased 9.4% from 714,000 units to 647,000 units. On a YoY basis, housing permits have edged up just 0.2%, but with single-family permits dropping 7.9%. 


The Federal Open Market Committee increased the federal funds rate by 75 basis points at the conclusion of its June 14–15 meeting, with the current range now at 1.50% to 1.75%. The range was 0%-0.25% at the start of the year. NAM expects there will likely be 50-basis-point rate hikes (or more) at both the July 26–27 and Sept. 20–21 FOMC meetings. In the latest economic projections, the median forecast of participants for the federal funds rate is 3.4% by the end of 2022.  


FOMC participants have reduced their outlook for real GDP growth, down from a forecast of 2.8% in March for 2022 to 1.7% in the latest projections. They see 1.7% growth for 2023 as well, down from 2.2% in the previous iteration. As a result, the unemployment rate should rise to 3.7% and 3.9% in 2022 and 2023, respectively, up from 3.5% in both years in the March projections.