Housing starts surge 22.2% in February; producer prices tame

Source: USATODAY.com






Housing starts surge 22.2% in February; producer prices tame

WASHINGTON (AP) — Housing construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except the West.
The Commerce Department reported Tuesday that construction of new homes and apartments jumped 22.2% in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.

Meanwhile, the Labor Department reported that its wholesale price index edged up a slight 0.1% in February as a big drop in food costs offset a second monthly increase in energy prices.

While the surge in housing construction was far better than the continued decline economists had expected, the housing industry still faces problems.

Even with the big increase, construction activity remains 47.3% below where it was a year ago. The strength in February was led by a big increase in apartment construction, which can be highly volatile from month to month.

FIND MORE STORIES IN: United States | Barack Obama | Federal Reserve | United States Labor Department | United States Commerce Department | October-December | National Association of Home Builders | Credit Suisse
All areas of the country reported an increase in February, except the West, which has been hardest hit by the current housing slump.

The 0.1% increase in wholesale inflation was much lower than the 0.8% surge in January and smaller than the 0.4% increase economists had expected. Compared with a year ago, wholesale prices are actually down 1.3%.

Core inflation, which excludes energy and food, edged up 0.2% in February, only slightly higher than the 0.1% gain economists had expected. Core prices had risen 0.4% in January.

Only last summer, officials at the Federal Reserve had started to worry that a surge in energy costs could spread to other areas of the economy and boost inflation to unacceptable levels. But after the financial crisis struck in the fall, the Fed switched signals and is now aggressively fighting a deepening recession with no real threat of inflation.

On Wednesday, Fed officials are expected to signal that they will continue to keep a key interest rate at a record low near zero percent for as long as necessary and use other unorthodox means to jump-start the economy.

The Fed has the leeway to focus on the weak economy because inflation pressures are expected to remain law in the face of widespread layoffs that are depressing wage demands.

The 0.1% rise in wholesale inflation in February reflected a 1.3% increase in energy prices, which have been rising for two months after having retreated for five straight months.

Gasoline prices jumped 8.7% in February after a 15% surge in January.

Food costs fell for a third straight month, dropping 1.6% in February, the biggest one-month decline in three years. The costs of eggs, fruits, vegetables and dairy products were all down.

Outside of food and energy, prices for cigarettes rose 2.7%, the biggest increase in two years, while the price of light trucks rose 1.3%, a gain that is not expected to last given the weakness in auto sales.

Prices for computers dropped 4.5%, the biggest one-month fall since January 2005.

Inflation is not expected be a problem for some time to come given the prolonged recession, which is already the longest downturn in a quarter-century. Overall economic growth fell at an annual rate of 6.2% in the October-December quarter and many economists expect the drop in the gross domestic product for the current quarter will be a similarly steep decline.

Many economists say the Fed will not even contemplate interest rate increases until the unemployment rate, which soared to a 25-year high of 8.1% in February, declines.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.







Read more: www.usatoday.com/money/economy/housing/2009-03-17/housing-starts_N.htm

---

Maybe St Patty's day will be the beginning of real good luck and good news. I think its about consumer confidence.

nuff said!!!!!!

I'm just saying that this actually is the first really positive sign I've seen. I believe a huge part of the economy's activity is caused by consumer confidence. I think that Obama's inauguration gave the economy a boost of confidence and that made people feel like maybe things could start improving and maybe it was safe to build a house. Its an indicator, not a cure. Maybe housing starts were too high a year ago. That seems like a fairly reasonable possibility to me.

47.3% below where it was last year is a hell of a lot better than 74% below.

It is likely do to the change in the weather.

Something seriously needs to be done about this network

Even with the big increase, construction activity remains 47.3% below where it was a year ago ----- this IS NOT good news! the increase is mostly due to new apartment construction, adding to that inventory will depress rents and though that may seem good for renters it is bad for the industry overall. besides the fact that it skews the numbers...............

they can invest in building something. I definitely see that as good news. Not a cure but heading in the right direction again.
Happy St Patty's day.

homes on the market, thousands upon thousands more for sale and we are going to glut the market even more? I have never met a developer or home builder with any sense in their heads at all -

unbelievable

Sign of the times.

Ok, if housing starts increased 22 percent, mainly due to new apartment buildings...this is NOT
a sign of growth!

It's a sign that people are very serious about downsizing. Not only are they NOT buying cars,
trinkets at Pier One and leather furniture---they're opting for a more simpler, downsized lifestyle.

I don't know how many times I've said to my husband, that I wish we could move out of the house and
into a small apartment or condo--and totally downsize our life.

It's possible---if this increase in housing numbers is due to more apartments being built--that people
are "dropping out" of the consumerism gain. It's also possible that their more apartments are in demand
because people are in dire financial straights, and are opting for a lower housing payment.

I would assume that those who don't end up on the streets or in shelters would have to rent an apartment. So it makes some sense in the current environment.

...when a person wants to buy a new home--that they are finding that they can get more from their money by
BUILDING NEW instead of buying an existing home?

When a home owner puts their home on the market--they price it according to market conditions--but often they will price it
in a range that limits their financial losses.

For example, if a homeowner purchased a $300,000 house in 2004, that is now worth about $200,000--but they
still owe $235,000. This creates UPWARD PRESSURE on existing homes--because homeowners are trying to minimize their
losses.

Then, you have the builders. They're scrambling for work and very willing to work with anyone who wants
to build a house and throw some dollars their way. Consumers have more power and builders have more incentive
to make better deals. This creates DOWNWARD PRESSURE on new home prices. Builders may even throw in cool
amenities for free, such as granite countertops, wood floors, etc--to entice buyers.

Right now--maybe market conditions make it much more advantageous to build a new home, than to buy existing.

Is that possible?

Growth is a cancer if it is unregulated or created strictly to keep one industry alive regardless of
real need/demand and consideration of its impact on other things (like water availability, enviromental concerns, density/infrastructure issues, etc. Etc. ETC.). That kind of 'growth' is madness and hardly a way to plan holistically so that things stay in a healthy balance.

The building industry have powerful Lobbyists and therein lies one of the biggest issues...the way decisions are made and influenced.

That's a huge part of what this country's economy needs.