Here is a summary of this week’s Monday Economic Report:

The manufacturing economy has hit some speed bumps, according to recent data. Industrial production declined 0.5 percent in April—more than expected—with capacity utilization levels back to where we were at the beginning of the year. The slower pace of domestic and global sales has negatively impacted activity, with production down mostly across-the-board. Only four of the 19 major manufacturing sectors experienced an increase in output for the month. Moreover, annual growth in manufacturing production of just 1.3 percent is insufficient, and such low rates of industrial growth are not enough to help boost hiring and output. Ideally, we would like to see annual output growth of 4.5 percent or greater, as outlined in the NAM’s “20/20 Vision” earlier this year.

The national pullback in manufacturing activity extends to two of the regional manufacturing surveys released last week. Sentiment surveys from the New York and Philadelphia Federal Reserve Banks found contracting levels of new orders, shipments and the average workweek. In addition, manufacturers were more negative in their overall views of the current business environment. However, employment was mixed between the two reports, with a pickup in hiring reported in the Empire State survey, and manufacturers in both Fed districts were cautiously optimistic about future growth. As a result, capital investments are expected to increase in the coming months.

The Conference Board’s Leading Economic Index—a forward-looking measure of the U.S. economy—rose a healthy 0.6 percent in April, with strong growth in housing permits. New residential permits exceeded the 1 million mark for the first time since June 2008, even as housing starts fell for the month. The long-term trend for the housing market remains positive, with permits data highlighting growth in future activity. Other good news can be seen in the latest University of Michigan consumer sentiment survey, with Americans reporting optimism levels not seen since mid-2007. Retail sales were also higher, even with declines in gasoline station spending due to lower petroleum costs. (continue reading…)

The Census Bureau and the U.S. Department of Housing and Urban Development said that new residential construction declined significantly. New housing starts were down from an annualized 1,036,000 units in March to 853,000 units in April. These numbers illustrate the choppiness of the housing market from month-to-month that occurs even with seasonally-adjusted data. While the longer-term trend line remains positive (up 13.1 percent year-over-year), it is hard not to say that the construction figures were not disappointing.

The largest factor behind the decline in housing starts was the plummeting of multi-family housing starts, down from 398,000 in March to 243,000 in April. These declines appear to have taken place in all regions of the country except for the Midwest. Multi-family starts nationally are now slightly lower than they were 12 months ago, reversing the healthy gains seen in recent months. Meanwhile, new single-family construction starts decreased less dramatically, down from 623,000 to 610,000. These losses were primarily in the South. The year-over-year pace for single-family starts is still quite impressive, up 20.8 percent.

At the same time, housing permits soared to 1,017,000 annualized units in April from 890,000 in March. The permits data are important because they serve as a proxy for future construction activity, and as such, they allow us to get less worried about the declines in starts. The good news is that this is the first time that housing permits have been above 1 million since June 2008 (when they were headed lower). The year-over-year growth in housing permits between April 2012 and April 2013 was a very healthy 35.8 percent. (continue reading…)

The Census Bureau and the U.S. Department of Housing and Urban Development said that housing permits rose to 812,000 in July, its highest level since August 2008. This represents a 6.8 percent gain, up from 760,000 in June. To keep the ascent in perspective, housing permits were 684,000 in January. July’s gains reflect increases in both single-family and multi-family permitting, with larger growth in the latter. Higher permitting levels could indicate increased residential construction down the line, and I have predicted for some time that we would reach 800,000 housing starts by year’s end.

With that said, housing starts dropped slightly for the month from 754,000 to 746,000. The decline was attributable to fewer single-family units being started, down from 537,000 to 502,000. The number of multi-family unit starts, though, rose from 217,000 to 244,000. Even with overall housing starts lower in July, the longer-term trend remains a positive one. There were 614,000 housing starts on July 2011, representing a 21.5 percent year-over-year gain.

Housing completions were also higher, up from 624,000 to 668,000 for the month. Completions were up 5.4 percent year-over-year.

While the latest housing starts provide mixed news, the larger storyline is positive. Gradual improvements in housing have helped lift confidence in this still-depressed marketplace. This is good news for both manufacturers and the larger macroeconomy. After all, housing still represents a major headwind for the economy, with excess inventory, upside-down mortgages and financial concerns still persistent issues. Nonetheless, it is nice to see slow-but-steady progress in housing starts and overall real estate activity.

This sentiment is reflected in the latest survey from the National Association of Home Builders (NAHB) and Wells Fargo. Their Housing Market Index, which was released yesterday, rose from 35 in July to 37 in August. This is the highest point since February 2007. This is a tremendous turnaround in home builder confidence since September 2011, when the index stood at 14. Still, there is a long way to go to improve this market beyond its sub-par levels.

Gains in August were primarily in the Midwest and South, with declines in the West and Northeast. The outlook for future activity remains optimistic. The index for single-family sales over the next six months increased from 43 to 44 for the month. It had been 29 in January.

Chad Moutray is chief economist, National Association of Manufacturers.