Over the last few months, we have seen how the Federal Reserve has been waiting to decrease interest rates until they observe signs of an economic slowdown. That’s why they haven’t altered the rates since July 2023. However, the Federal Reserve is starting to consider decreasing interest rates by September of this year. One of the reasons for this consideration is the current inflation rate and the unemployment rate, partly due to the slowdown in the construction sector.

Last Friday, the government of the United States published the monthly report on the construction industry, where they stated that they were beginning to call for a lowering of interest rates. One of the reasons is the stagnation in construction permits. The U.S. government reported 1.396 million construction permits, representing a 4% decrease from the previous month and a 3% decrease from August 2023. This data clearly shows stagnation over the last year.

In addition, the number of new privately-owned housing units started has been struggling over the last two years, representing a 15% decrease from the previous year and a 6.8% decrease from the previous month. Moreover, the latest data presented by the U.S. government shows the same level of new housing units started as in July 2020.

The construction industry has a significant impact on American society, starting with employment. This means that if this sector begins to suffer, it will have several consequences for the U.S. economy. This also implies that the industry plays a significant role in the decisions of the Federal Reserve. The only way to address this issue is to stimulate demand, and the best approach to achieve this is by reducing interest rates.