Building Permits Survey (BPS)

The Building Permits Survey (BPS) serves as an economic indicator that offers insights into the health of the construction industry and its future growth potential. The survey assesses the number of building permits granted for new privately-owned housing units. By monitoring the issuance of building permits for new construction projects, the BPS illuminates the overall demand for construction services and the general economic outlook.

Let’s delve into the BPS, its methodology, its importance as an economic indicator, and its potential effects on various sectors, including housing, construction, and financial markets.

The Building Permits Survey (BPS) is a monthly survey carried out by the U.S. Census Bureau. It tracks the number of building permits issued by local governments for new privately-owned residential construction. Building permits are necessary before construction activities can begin, and their issuance indicates the intentions of builders and developers to initiate new projects. By observing trends in building permit issuance, the BPS provides crucial information regarding the direction of the construction industry and the overall economic environment.

The BPS gathers data from a sample of local governments nationwide, encompassing both urban and rural regions. The sample is designed to be representative of the larger population, ensuring that the survey accurately reflects national trends in building permit activity. The collected data includes details on the number of permits issued, the types of construction projects (residential, non-residential, or alterations and additions), and the estimated value of these projects.

The Building Permits Survey is a vital economic indicator for several reasons:

• Leading indicator: As a leading indicator, the BPS offers early signals regarding the future direction of the construction industry and the economy overall. An increase in building permit issuance suggests a rising demand for construction services and potential industry expansion, while a decrease may indicate a slowdown or contraction in the sector.
• Housing market trends: The BPS is particularly effective in identifying trends within the housing market, as a significant number of building permits are issued for new residential construction projects. An uptick in residential building permits can indicate a robust housing market, characterized by rising demand and potential price increases. Conversely, a drop in residential building permits may point to a weakening housing market, with diminished demand and possible price declines.
• Employment and economic growth: The construction industry is a major employer and a key contributor to economic growth. An increase in building permit issuance can signal job creation and economic expansion, while a decline may suggest job losses and a potential slowdown in economic growth.
• Investment opportunities: For investors, the BPS offers valuable insights into the health of the construction industry and potential investment opportunities in related sectors, such as real estate, construction materials, and financial services.

Inflation expectations! The BPS can affect inflation expectations, as heightened demand for construction services and a growing economy may lead to increased inflationary pressures. Central banks often respond to rising inflation by increasing interest rates, which can result in currency appreciation. Conversely, a slowdown in the construction industry and lower inflation expectations may lead to reduced interest rates and currency depreciation.

The Building Permits Survey has ramifications for several sectors, including:

• Housing: Trends in residential building permits can influence the housing market, impacting home prices, housing supply, and demand dynamics.
• Construction: The BPS directly affects the construction industry, as an increase in building permits indicates higher demand for construction services, while a decline may suggest a slowdown in the sector.
• Financial markets: The BPS can sway financial markets, as trends in building permit issuance can influence investor sentiment and expectations regarding economic growth, interest rates, and inflation. This, in turn, can affect stock prices, bond yields, and currency values.

The Building Permits Survey is a crucial economic indicator that provides valuable insights into the health of the construction industry and the overall economic landscape. By tracking trends in building permit issuance, the BPS offers early signals about the direction of the construction industry, the housing market, and the broader economy.