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Housing starts surge; wholesale prices edge up
Associated Press
Issue date: 3/17/09 Section: News
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 percent in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.
Meanwhile, the Labor Department reported that wholesale prices edged up a slight 0.1 percent in February as a big drop in food costs offset a second monthly increase in energy prices.
After the news, Wall Street posted gains, with the Dow Jones industrial average gaining slightly and the Nasdaq composite index rising more than 1 percent. The better-than-expected reports on housing and inflation were offset by news of a dividend cut at Alcoa Inc. and layoffs at Nokia Corp.
While the surge in housing construction was far better than the continued decline economists had expected, the rebound is likely to be viewed as a temporary gain given all the problems the housing industry still faces.
Even with the big increase, construction activity remains 47.3 percent 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.
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 percent increase in wholesale inflation was much lower than the 0.8 percent surge in January and smaller than the 0.4 percent increase economists had expected. Compared with a year ago, wholesale prices are actually down 1.3 percent.
Core inflation, which excludes energy and food, edged up 0.2 percent in February, only slightly higher than the 0.1 percent gain economists had expected. Core prices had risen 0.4 percent 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.
The Commerce Department reported Tuesday that construction of new homes and apartments jumped 22.2 percent in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.
Meanwhile, the Labor Department reported that wholesale prices edged up a slight 0.1 percent in February as a big drop in food costs offset a second monthly increase in energy prices.
After the news, Wall Street posted gains, with the Dow Jones industrial average gaining slightly and the Nasdaq composite index rising more than 1 percent. The better-than-expected reports on housing and inflation were offset by news of a dividend cut at Alcoa Inc. and layoffs at Nokia Corp.
While the surge in housing construction was far better than the continued decline economists had expected, the rebound is likely to be viewed as a temporary gain given all the problems the housing industry still faces.
Even with the big increase, construction activity remains 47.3 percent 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.
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 percent increase in wholesale inflation was much lower than the 0.8 percent surge in January and smaller than the 0.4 percent increase economists had expected. Compared with a year ago, wholesale prices are actually down 1.3 percent.
Core inflation, which excludes energy and food, edged up 0.2 percent in February, only slightly higher than the 0.1 percent gain economists had expected. Core prices had risen 0.4 percent 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.
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