The U.S. Census Bureau reported housing starts increased (+10.7%) to a seasonally adjusted annual rate of 1.521M units in February, the biggest gain in nine months. Single-family housing starts which account for the largest share of homebuilding surged (+11.6%) to a rate of 1.129M units, jumping (+35.2%) from a year ago. Starts of five units or more increased (+8.6%) to a rate of 377K units, slumping (-35.9%) from a year ago. New residential building permits, a proxy for future construction, increased (+1.9%) to a seasonally adjusted rate of 1.518M units, the highest level since August ’23. New residential building permits are running (+2.4%) above their February 2023 level. Single-family permits were up (+1.0%) from January’s revised 1.021M units, while five units or more permits increased (+2.4%) to 429K. Building permits increased in the Northeast (+36.2%) and Midwest (+3.8). Both the West (-6.8%) and South (-1.3%) saw a drop in building permits. Single-family housing completions at 1.072M, surged (+20.2%) above January’s revised reading, while five units or more completions were up (+20.8%) to 644K. The number of houses approved for construction but not yet started increased (+0.4%) to 270K units, with the backlog for single-family housing dropping (-1.4%) to 141K.

The Federal Open Market Committee (FOMC) announced the it would keep its benchmark federal funds rate in the range of between 5.25% to 5.5%. This is the fifth consecutive meeting with no increase. Previously the central bank had raised its benchmark borrowing rate 11 times. The FOMC signaled that it still isn’t yet ready to begin cutting rates in the near term. The FOMC statement stated that “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent”. The FOMC’s latest projections show the economy growing 2.1% in 2024, up from the 1.4% forecast in December. The projection for the unemployment rate was little changed at 4.0%, down slightly from the 4.1% forecast in December. The projection for inflation was unchanged at 2.4%. Core inflation was projected higher at 2.6%, up from the 2.4% forecast in December. The fed funds rate is projected to peak at 4.6% in 2024, suggesting three interest rates cuts of 0.25%. The “dot plot” showed seventeen officials expecting a rate cut in 2024 and two seeing no cut at all.

S&P Global reported that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, dropped slightly to 52.2 in March, from February's eight-month high of 52.5. A value above 50 is indicative of expansion. Output has still risen for 14 consecutive months. The service sector contributed to the slowdown as activity rose at the weakest pace in three months. The flash US Services Business Activity Index reported down to 51.7 from 52.3. Conversely manufacturing output grew at the fastest pace in 22 months due primarily to a rise in new orders. The Flash US Manufacturing Output Index increased to 54.9 from 53.5 in February. While rates of expansion in output and new orders ticked lower, job creation ticked higher, marking the fastest pace in 2024. Jobs growth in the manufacturing sector hit an eight-month high. The Flash US Manufacturing PMI index showed increasing inflationary pressure, reaching a 21-month high 52.5. Rates of inflation in output prices surged significantly in both manufacturing and services, reaching 13- and eight-month highs as companies transferred increased input costs to their customers.