U.S. Economy: Housing Starts, Permits Decline as Slump Deepens

[marmar]

from Bloomberg:



U.S. Economy: Housing Starts, Permits Decline as Slump Deepens

By Courtney Schlisserman

March 18 (Bloomberg) -- Housing starts in the U.S. dropped in February and building permits fell to the lowest level in more than 16 years, signaling the paucity of construction will continue to hurt economic growth.

Builders broke ground on homes at an annual rate of 1.065 million, down 0.6 percent from January, the Commerce Department said today in Washington. Permits, a guide to future activity, sank a greater-than-forecast 7.8 percent. At the same time, the Labor Department reported that producer prices excluding food and energy rose 0.5 percent, more than economists estimated.

The Federal Reserve, which traders anticipate will cut its main interest rate by at least one percentage point today, is struggling to revive confidence in American capital markets eroded by the collapse of subprime mortgages. The housing rout has subtracted from economic growth the past two years and will do so again in 2008, Fed officials have said.

``The recession in housing, which will now extend to nine quarters assuming a contraction this quarter, means that inflation in the Fed's mind is of secondary importance,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.

Treasury notes remained lower after the reports. Yields climbed after Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. reported smaller-than-estimated declines in first- quarter profit, easing concern credit-market losses will deepen.

Economists had forecast starts would fall to a 995,000 pace and permits decrease to 1.02 million, according to the median of estimates in a Bloomberg News survey.

No `Bottoming Out'

``We don't see a bottoming out,'' said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina.

The decline in starts was led by a 6.7 percent slump in construction of single-family homes. February's 707,000 pace was the weakest since January 1991. Work on multifamily homes, such as townhouses and apartment buildings, increased 14 percent to an annual rate of 358,000 in February.

The Fed has been forced to put inflation aside and focus on stimulating the economy, which Harvard University economist Martin Feldstein says is in a recession. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=a2YnE7Q6fhE0&refer=home

[progressoid]

1. Don't worry the White House is on top of it.

They'll fix it.

[4dsc]

2. With a bailout for Wall street no doubt.. n/t