By: Reuters/cnbc.comConstruction of new homes in the United States fell sharply last month,
showing potential weakness in the economy's recovery, while consumer
prices rose slightly more than expected.
The Commerce Department said on Wednesday
housing starts dropped 10.6 percent to a seasonally adjusted annual
rate of 529,000 units, the lowest level since April and the percentage
drop was the biggest since January.
Financial markets had
expected starts to rise to 600,000 units. September's housing starts
were revised upwards to a 592,000 unit rate from the previously
reported 590,000 units.
"The trickle-down
effect of the housing number is going to be amazing," said Dan Cook,
senior market analyst at IG Markets, Chicago. "It's likely that more
construction crews will get cut after this, and the supplier who supply
those crews will be hurt as well. This is not good news at all."
A separate report from the Labor Department showed the Consumer Price
Index rose 0.3 percent, a touch above market expectations for a 0.2
percent increase, after rising an unrevised 0.2 percent in September.
U.S. stock index futures turned negative after
the data, while U.S. Treasury debt prices extended losses on the higher
than expected inflation data. The U.S. dollar rose against the euro,
and New York gold futures held gains near record highs.
Groundbreaking for
single-family homes fell 6.8 percent last month to an annual rate of
476,000 units, the lowest since May. Starts for the volatile
multifamily segment tumbled 34.6 percent to a 53,000 annual pace,
extending the previous month's slide.
Compared to October
last year, housing starts dropped 30.7 percent. The latest data will be
a blow to the housing market, which had shown signs of stabilization
after a three-year slump. Residential investment contributed to
economic growth in the July-September period for the first time since
2005.
The U.S. economy
expanded in the last quarter after four straight quarters of decline.
The recovery in the housing market has been led by the popular $8,000
tax credit for first-time buyers, which has since been extended and
expanded by the government.
It had been due to
expire this month. In October, it was unclear whether the incentive
would be extended and this could have contributed to the slide in
construction activity last month.
New building permits, which give a sense of
future home construction, fell 4 percent to 552,000 units in October.
That compared to analysts' forecasts for 580,000 units. Compared to the
same period a year-ago, building permits fell 24.3 percent.
The inventory of
total houses under construction dropped to a record low 560,000 units
last month, the department said, while the total number of permits
authorized but not yet started tumbled to an all-time low of 93,900
units.
In the Labor
Department report, core prices, which exclude food and energy, rose a
more moderate 0.2 percent last month after increasing by the same
margin in September.
"There's very little
cost pass-throughs (in the CPI). Inflation is utterly tame," said Tom
Porcelli, senior economist at RBC Capital Markets in New York.
A spike in prices on used cars and trucks and new vehicles accounted for more than 90 percent of the rise in core prices.
It was the biggest increase in new vehicle prices since 1981.
Source:
cnbc.com