Housing starts for May climbed a modest 2.4% Rise in industrial output is lackluster

June 17, 1993|By New York Times News Service

WASHINGTON -- Builders broke ground for new homes at only a modestly faster pace in May, despite a reported early-spring sales boom and a rise in construction jobs, the Commerce Department reported yesterday.

The somewhat disappointing 2.4 percent rise in housing starts meant this crucial sector is likely to contribute almost nothing to gross domestic product for the April-June quarter, despite the lowest mortgage rates in about 20 years and a reversal of lumber prices that soared over the winter.

Moreover, analysts noted that permits for future home construction edged up a scant 1.2 percent last month.

"We've been expecting a better sort of snapback" following a poor, storm-ravaged first quarter, said David F. Seiders, economist for the National Association of Home Builders.

In a separate report, the Federal Reserve said industrial production climbed two-tenths of 1 percent last month, a lackluster rise but about what had been expected based on job and workweek statistics reported in early June.

Two of the burdens on housing, which is considered a predictor of the economy at large, are thought to be some lingering effects of the doubling of lumber prices between October and March and the expiration of tax incentives to build apartments for the poor. Yet these seem considerably outweighed by general uncertainty among potential buyers.

The rise in starts for May, to an annual pace of 1,244,000, was almost entirely accounted for by single-family homes. A small gain in buildings with two to four dwelling units was offset by a decline for apartment houses containing five or more units.

"What we're looking at is steady if unspectacular increases on the single-family side and continued weakness on the multifamily side," said Mark Obrinsky, senior economist for the Federal National Mortgage Association. And he said he expects more of the same in coming months.

The Commerce Department revised upward yesterday, to 8.1 percent from 6.7 percent, its estimate of the housing starts gain for April while reporting that the March decline, 4.7 percent, was even steeperthan had been thought.

Regionally, starts in May were mixed. The Midwest and South posted gains of 10.2 percent and 2.8 percent, respectively, while the West had a 3.3 percent decline. The Northeast showed a negligible decline.

Permits, which some specialists regard as a more reliable statistical indicator of current -- but not future -- activity, were also mixed last month. The 1.2 percent rise, following a 6.5 percent April spurt, occurred mainly in the Midwest and, to a lesser extent, in the Northeast.

The South and West, in contrast, recorded small declines.

May's modest gain in starts seemed to belie earlier reports that sales of new homes soared 22.7 percent for the month, leaving inventories at the lowest point since the early 1970s, and that construction jobs rose 103,000 in April and May.

Although industrial production rose only slowly, output of the nation's factories, mines and utilities has now risen for eight straightmonths, the longest such string in a decade.

The operating rate at industrial companies remained unchanged May, at 81.6 percent.

Production of durable goods -- big-ticket items ranging from computers to cars -- edged up one-tenth of 1 percent, while nondurable goods output advanced three-tenths of 1 percent. Mining output jumped half of 1 percent. A 1 percent rise in oil and gas drilling helped offset a 2 percent drop in coal mining. Output at utilities fell three-tenths of 1 percent.

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