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Building permits report contains the amount of building permits for new houses published within third week of every month, simultaneously with New homes sales, at 8:30 a.m EST (New York).
Description of Building permits index
This fundamental indicator of the USA slightly influences on the Forex market and is seasonal, however it can serve as supplementary. Macroeconomic index Building permits is collected on the basis of data from 19 000 enterprises issuing those permits. Basically this indicator is anticipating, because it preliminarily shows solvency of people. In addition, the number of permits allows judging about forthcoming unemployment level. If there are more permits than for the previous period, this economic sector will need employees, therefore, unemployment level can drop down.
Building permits index is related to interest rates, because for building new houses companies uses bank credits. Upon that, higher value indirectly tells about improved income of people, because they can afford bank loans for building new residencies. Alongside with that, high Building permits value shows consolidation of national currency.
Historic reference
"Building permits" index enters composite index of leading indicators. Total of those indices allows experts concluding about possible recession in the country. According to historical data, all indicators constituting this index started decline prior to recession and went up before beginning of upsurge. Over the recent 50 years in the USA with the help of reconstruction method seven official recessions were predicted, but such modelling also showed five more declines that did not take place in practice.
This indicator was especially closely considered after mortgage crisis in the USA had happened in 2006-2007. That time the figure lost about 10% against the previous period. One more time it confirms the theory about possibility of relating the index decline with subsequent recession in the economy. After 2009 “building permits” index started growth again, and then consolidation of national currency along with stabilization followed.
Thus, building permits index is the figure used in fundamental analysis of the Forex market. Its advantage is the possibility of sending anticipating signal, whereas dependence on interest rates of Central Banks and seasonality can be related to disadvantages.
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