LIVE MARKETS-Pair of aces: Housing starts, industrial output beat the house

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PAIR OF ACES: HOUSING STARTS, INDUSTRIAL OUTPUT BEAT THE HOUSE

Investors were treated to two consensus-beating indicators on Friday, underscoring the health of the U.S. economy and cementing the likelihood that the Fed will keep its hands off the rate cut button for the time being.

Groundbreaking on new American homes USHST=ECI surged by 15.8% in December to 1.499 million units at a seasonally adjusted annualized rate (SAAR), or the highest number since February 2024, according to the Commerce Department.

That's an 13.6% surprise to the upside and represents a robust bounce-back from November's downwardly revised 3.7% decline.

"This pickup in construction activity jibes with what had been climbing expectations from builders for sales over the next six months," writes Daniel Vielhaber, economist at Nationwide. "However, it should be noted that sales expectations have diminished since then due to what are now expected to be higher-for-longer interest rates."

Building permits USBPE=ECI, considered among the most forward-looking housing market indicators, edged down 0.7% to 1.483 million units SAAR.

Analysts called for a steeper, 2.2% decline.

Looking under the hood, single-family starts increased 3.3%, while the smaller, more volatile multiple unit segment soared 61.5%.

On the other hand, while single-family permits increased 1.6%, multiple unit permits fell 5.0%.

In separate report from the Federal Reserve, industrial production USIP=ECI rose by 0.9% last month, triple the 0.3% economists predicted.

Factory output USFOUT=ECI also multiplied estimates by three, increasing 0.6% versus the 0.2% consensus.

Drilling down, utilities, mining and materials provided some upside muscle. Among finished goods, business equipment and high-tech output - the latter likely a result of the AI craze - also gave healthy boosts to the headline.

Capacity utilization USCAPU=ECI, a measure of economic slack, unexpectedly tightened by 0.6 percentage point to 77.6% instead of standing pat at November's upwardly revised 77.0%.

That's the tightest reading since August.

Noting that industrial output has been flat for about two years, Carl Weinberg, chief economist at High Frequency Economics says "This latest data point suggests that we mark up our expectations for Q4 GDP growth."

"However, this report adds to the body of evidence that is telling the Fed there is no harm in waiting a while before that next rate cut," Weinberg adds.

(Stephen Culp)

FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:

U.S. STOCKS STRIVE FOR STRONG WEEKLY GAINS - CLICK HERE

INDIVIDUAL INVESTOR BULLS FLEE AS BEARS MAKE THEMSELVES KNOWN - AAII - CLICK HERE

GRANOLAS OR MAG-7? GS SAYS ONE HAS MORE CRUNCH RIGHT NOW - CLICK HERE

MORE OF THE SAME FOR FRANCE THIS YEAR, SAY BOFA - CLICK HERE

SHARES RISING, FTSE 100 AT RECORD - CLICK HERE

EUROPE BEFORE THE BELL: BAD NEWS IS GOOD NEWS FOR THE FTSE - CLICK HERE

MORNING BID: CAUTIOUS END TO WEEK AS TRUMP INAUGURATION LOOMS - CLICK HERE

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)