Appliance and Medical
Increase in housing permits positive for appliance production; medical production could be turning up.
Increase in Housing Permits Positive for Appliance Production
The real 10-year treasury rate was 1.85 percent in January, the first time the rate was below 2 percent since November 2015 and the lowest it has been since August 2015. Since the Fed announced it was raising its overnight rate, the real 10-year treasury rate dropped each of the following two months. The change in the rate had increased for 12 months in a row, but in January it fell for the first time since the previous January.
On an annual basis, housing permits have been growing at an accelerating rate for most of the last year. The most recent turn in the change in the real 10-year treasury rate was a positive sign for housing permits, indicating that their growth rate could see further acceleration.
Housing permits are a reasonably good leading indicator of appliance production, because new homes require many new appliances. Over the last year, however, the rate of growth in appliance production was faster than one would have expected based on the rate of growth in housing permits. Therefore, appliance production may grow at a slower-than-expected rate in 2016, even with accelerating growth in housing permits. The outlook for appliance production still appears positive, however.