Rob Carnell, Chief International Economist at ING, notes that the US housing starts and permits turned down sharply in March – this was one of the better performing bits of the US activity, and raises further questions about the direction of the US economy. Key Quotes “With talk of recession in the US economy beginning to gain traction again ahead of what will probably be a very weak 1Q16 GDP release next week (just after the April FOMC meeting), we are looking for evidence on either side of the argument to help us update our forecasts and confirm or deny the recession argument. We feel the evidence for recession is quite circumstantial, with both weak and strong patches within the US economy. But one of those stronger patches has been the US home building sector, and this has taken a big dent in March. Housing starts fell by 8.8% MoM in March, with permits falling 7.7%. Both single family and multifamily home starts were down sharply, though thanks to strong growth in January and February, this will merely dampen the boost to 1Q16 GDP growth from residential construction, not overturn it. But with permits providing a forward indication for weak 2Q construction, our conviction that what we are seeing is just one of the usual soft-patches in US data, not anything more alarming, is coming under pressure. We have been consistently below the recently cut consensus forecasts for US GDP growth (2.0% for 2016) and remain so even now (INGF 1.9% for 2016). But the likelihood of a really weak 1Q16 GDP forecast means that we will almost inevitably have to trim our figures further. Something closer to 1.5% for the full-year would be more consistent with the sorts of numbers published for 1Q16 by the NowCasters, even assuming a recovery to a 2.0-2.5% range for the rest of the year.” For more information, read our latest forex news.