Housing Starts Off Slow

Rueters reported yesterday that the U.S. inflation is edging up and housing starts are falling. The sharp fall of new home construction last month may show lingering weakness in the economic recovery.

The Commerce Department reported yesterday that housing starts dropped 10.6 percent, or 529,000 rental units were built instead of an anticipated 600,000. This seasonally-adjusted number is the lowest level of housing starts since April and the biggest percentage drop since January.

By comparison, single-family home starts fell 6.8 percent last month to 476,000, and multi-family segment dropped 34.6 percent to 53,000. There has been nearly a 31 percent overall drop since last October.

Dan Cook, senior market analyst at IG Markets, Chicago, who is not too optimistic about what these numbers means for the economy. Rueters reports Cook as saying "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."

This slowdown is a disappointment after the housing market showed signs of stabilization after a three-year slump. Residential investment contributed to the growth, and, may have affected the drop this month.

Building permits, which are watched in an attempt to predict future growth, also dropped 4 percent.

"The end of the tax credit was looming," said David Crowe, chief economist at the National Association of Home Builders, told MSNBC. "At that point, builders were real uncertain about whether it would ever be extended, so they pulled way back."
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