Housing, production drop New reports suggest slump is continuing

April 17, 1991|By New York Times News Service

WASHINGTON -- In reports suggesting that the recession could linger beyond midyear, the government said yesterday that the pace at which builders broke ground for new homes fell 9 percent in March and that production of the nation's factories, mines and utilities fell three-tenths of a percent.

Private analysts generally took a dim view of the reports, despite a 2.4 percent increase in housing permits, the second straight monthly rise.

Housing starts are widely watched because they send large ripples through the economy, leading to sales of new carpeting, appliances and other goods.

Permits for future home construction, reported yesterday with housing starts, are a forward-looking indicator. For March, the indicator seemed to be moving in line with other data indicating that the housing market, at least, may have begun to rise from a bottom reached during the winter.

The decline in industrial production, although a bit less than expected, was broadly based, analysts noted, and was accompanied by a decline of four-tenths of a point in the operating rate of factories, mines and utilities.

At 78.7 percent, the overall operating rate is at its lowest point since September 1986, when it measured 78.6 percent. The rate for factories alone, 77.4, is the lowest since August 1983, when it was 76.0.

"The numbers are very dismal," said Lacy H. Hunt, chief United States economist for the Hongkong Bank Group. "Without question, they show the recession is continuing and the recovery is nowhere in sight."

Even housing, he added, has shown only "minimal" revival from the severely depressed pace of 847,000 starts in January.

Last month's pace of 901,000 housing starts followed a surge in February to 993,000, producing an average of 947,000 starts for the latest two months.

Another downbeat assessment came from the U.S. Chamber of Commerce, which cited a sixth straight month of falling industrial output and complained that the Federal Reserve has been too slow to cut interest rates to spur a recovery.

"Today's figures suggest that the recession will not be shorter and shallower than the average of postwar recessions," said Richard W. Rahn, the chamber's vice president and chief economist. "Therefore, it is peculiar, at the very least, that policy-makers seem hellbent on maintaining the status quo in hopes that a recovery will magically appear."

Yet the National Association of Home Builders, the industry's principal trade association, took some comfort in the housing figures and declared that January "was clearly the low point" for the battered industry.

Mark Ellis Tipton, the group's president, said that housing startshad been expected to fall in March, since the February total had been inflated by exceptionally mild weather in much of the country.

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