Stock Market News: Indices Up; China's Economy Grows While U.S. Construction Lags

“China’s economy increased by 4.9 percent in the third quarter, compared to the same period last year; the period was markedly slower than the 7.9 percent increase the country notched in the previous quarter. Industrial output, the mainstay of China’s growth, faltered badly, especially in September, posting its worst performance since the early days of the pandemic.

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"Two bright spots prevented the economy from stalling. Exports remained strong. And families, particularly prosperous ones, resumed spending money on restaurant meals and other services in September, as China succeeded once again in quelling small outbreaks of the coronavirus. Retail sales were up 4.4 percent in September from a year ago.

"Chinese officials are showing signs of concern, although they have refrained so far from unleashing a big economic stimulus. Now, real estate — in particular, the debt that developers and home buyers amassed — is a major threat to growth. The country’s biggest developer, China Evergrande Group (HK:3333), faces a serious cash shortage that is already rippling through the economy.

"Construction has ground to a halt at some of the company’s 800 projects as suppliers wait to be paid. Several smaller developers have had to scramble to meet bond payments. This could create a vicious cycle for the housing market. The worry is that developers may dump large numbers of unsold apartments on the market, keeping home buyers away as they watch to see how far prices may fall.” (NY TImes}

“U.S. homebuilding unexpectedly fell in September and permits dropped to a one-year low amid acute shortages of raw materials and labor, strengthening expectations that economic growth slowed sharply in the third quarter.

"The report from the Commerce Department on Tuesday also showed housing completions hitting a 13-month low. It followed on the heels of news on Monday that production at U.S. factories fell by the most in seven months in September. Strong demand as global economies emerge from the COVID-19 pandemic is running against worker shortages, straining supply chains.

"Housing starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month, the lowest level since April. Data for August was revised down to a rate of 1.580 million units from the previously reported 1.615 million units. Lumber prices are rising again after tumbling from record highs set in May. Building materials, like windows and electric breaker boxes, are in short supply. The pandemic has upended labor market dynamics.

"Starts have declined from the 1.725 million unit-pace level scaled in March, which was more than a 14-1/2-year high.

"Single-family starts, which account for the largest share of the housing market, were unchanged at a rate of 1.080 million units last month. Single-family starts fell in the Northeast and the densely populated South, but rose in the West and Midwest. Starts for buildings with five units or more dropped 5.1% to a rate of 467,000 units last month.

"Permits for future homebuilding plunged 7.7% to a rate of 1.589 million units in September. Single-family permits fell 0.9% to a rate of 1.041 million units. Permits for buildings with five units or more plummeted 21.0% to a rate of 498,000 units.

"Housing completions dropped 4.6% to a rate of 1.240 million units last month. Single-family home completions were unchanged at a rate of 953,000 units. The inventory of previously owned homes is near record lows, leading to record double-digit annual growth in home prices. Realtors estimate that single-family housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to close the inventory gap.” (Reuters)