Housing starts dip, but remain robust

Factory output up 0.1% in March

consumer index slips

The economy

April 17, 1999|By BLOOMBERG NEWS

WASHINGTON -- U.S. new-home construction was stronger than expected last month, and builders said they expect sales to stay strong.

Housing starts fell 1.3 percent last month to a seasonally adjusted annual rate of 1.766 million units, the Commerce Department said yesterday. That beat the expected rate of 1.741 million, and was the third-highest rate since February 1987.

Low unemployment, rising incomes and low interest rates led to record homebuying last year, a trend that unexpectedly continued at the start of this year. Housing starts reached a 12-year-high annual rate of 1.820 million in January.

"If it got any better, we would be in heaven," said Robert Toll, chairman and chief executive officer at Toll Brothers Inc., a builder of luxury homes.

In other economic reports yesterday:

Production at the nation's factories, mines and utilities rose 0.1 percent last month, mostly because of a surge in power use during wintry weather early in the month. The plant-use rate, which measures whether manufacturers are operating at their fullest capacity, fell to 80.1 last month from 80.3 in February. Last month's rate was the lowest since June 1992, suggesting that manufacturers have room to grow without investing in more equipment. That would help hold down inflation.

The University of Michigan said consumer confidence in the economy slipped, while staying at high levels. The university's index of consumer sentiment fell to 104.8 this month from 105.7 last month.

"It's the American consumer that's been the strong pillar of recent dramatic growth," said Paul Taylor, senior economist at America's Community Bankers in Washington. "American households are in very good financial shape."

The drop in housing starts was led by a 28.9 percent decrease in the Northeast, which was hit hard by ice and snowstorms early last month. In the Midwest, however, starts rose 12.7 percent as that region recovered from bad weather in February.

Single-family home starts fell 0.1 percent, the first drop since September. Starts of multifamily homes fell 5.9 percent.

Builders are facing shortages of certain materials, such as drywall and cement, forcing them to slow down their projects, he said.

Interest rates for 30-year mortgages hit a high for this year last month, discouraging some buyers. The rate has since declined to 6.87 percent this week, the lowest since the week that ended Feb. 26, Freddie Mac reported yesterday.

Last month's 0.1 percent increase in industrial production was less than analysts' expectations of a 0.2 percent rise and followed a 0.3 percent increase in February, the Fed said.

Factory production was unchanged last month after rising four of the previous five months, suggesting that the recovery in manufacturing is taking some time.

"Demand almost certainly began to pick up a few months ago, but manufacturers have taken the opportunity to run down their excess inventory before producing more," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Inc. in New York.

Pub Date: 4/17/99

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