US housing starts and permits dropped in August as weakness in housing construction continues, prolonging a domestic polyvinyl chloride (PVC) oversupply.
Permits for privately owned housing units in August fell to a seasonally adjusted annual rate of 1.312mn units, 3.7pc below July and 11pc fewer than a year earlier, according to the US Census Bureau and the Department of Housing and Urban Development. Single-family permits fell to an annualized rate of 856,000 units, down by 2.2pc from the month before and 11.5pc from a year prior.
Housing starts in August declined month over month by 8.5pc and on the year by 6pc to an annualized rate of 1.307mn units. Single and multi-family unit starts declined in August with single-family starts down by 7pc in July to 890,000 units and down from a year earlier by 11.7pc. Multi-family unit starts fell to 403,000 units, erasing the rise in the prior month, down by 11pc from July but up 15.8pc from August 2024.
Demand for PVC remains lackluster in the US on the weaker housing market. August contract prices fell by 1¢/lb as producers continued to run PVC plants at high operating rates. Capacity utilization was 89.7pc in August, up from 84.5pc a year prior, according to American Chemistry Council data compiled by Vault Consulting.
Domestic PVC supplies also ticked up in August, rising to 20.8 days of supply, up from 18.5 in July and 18.4 in August 2024.
Demand for emulsion-grade PVC (E-PVC) resins, which are used in flooring, coatings, and automotive products, has also been classified as slow. Prices fell to a 55-64¢/lb delivered US east coast range in the week ended 12 August, down from 57-65¢/lb the prior week as consumer demand for housing, remodeling, and vehicles remains dampened.
Federal Reserve policymakers cut the target lending rate Wednesday by a quarter point to 4-4.25pc, the first cut this year after cutting three times last year. The Fed cited a weakening labor market and penciled in two more rate cuts this year in its projections.
PVC market participants have for several months indicated that a series of rate cuts could help induce pent-up demand for housing by the middle of next year, but consumer confidence remains unsteady. The University of Michigan Consumer Sentiment Index read at 55.4 for September, down 21pc from the year prior and nearing its record low of 50 from June 2022, suggesting potential buyers may not immediately jump to buy new homes.
The latest builder sentiment survey for September held steady, sustaining a soft view for the single-family housing market. The reading remained unchanged from the prior month at 32, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is still well below builder confidence at the start of the year, with a 47 reading in January. Readings below 50 signify a bearish market environment.
